Lloyds Banking Group has become the first big bank to raise Standard Variable Rates, prompting suggestions that the era of borrowing at rock-bottom rates is drawing to a close as the Eurozone crisis deepens.
The move will affect more than 175,000 borrowers who took out mortgages from Bank of Scotland and The Mortgage Business, who will see their rates rise from 4.84% to 4.95% on November 1.
Many will not be able to remortgage. Bank of Scotland, which closed its books to new business in 2009, specialised in self-cert mortgages and also those of more than £1m.
Mortgage Business closed to new business in 2008.
Another lender within the Lloyds Banking Group whose Standard Variable Rate now seems more than likely to be under review, is Cheltenham and Gloucester
Other lenders are also likely to raise Standard Variable Rates in the near future because of a rise in the costs of funding mortgages caused by the Eurozone crisis.
According to Which?, about 40% of borrowers are on Standard Variable Rate, equating to about four million.
Three-month Libor, which reflects rates at which banks lend to each other, has been on the rise, climbing from 0.86% to 0.97% in the last two months.
Last week, Barclays, Santander and Northern Rock all raised the cost of their trackers for new customers, as well as fixed rate mortgages, which are linked to swap rates. Five-year swaps were 1.81% last week, a fall from 1.90% the previous week, but a rise from 1.63% two months ago.
For example, Barclays is raising the cost of its five-year fix at 70% LTV from 3.64% to 3.99%. Santander
Several building societies have already raised their Standard Variable Rates. For example, last year Skipton pushed up its rate from 3.5% to 4.95% – the same as Lloyds.
It appears that rates may have bottomed out and the tide is turning.
If you are on your lender’s variable rate and have concerns, please feel free to get in touch.
