SOME banks and building associations will not raise mortgage rates, despite the Bank of England’s latest rate hike.
The central bank raised its key interest rate from 4.25% to 4.5% – the 12th consecutive increase.
Rates are used by high street banks and lenders to set the rates it offers to customers for mortgages, loans and savings.
Rising interest rates are generally good news for savers, especially after a long period of very low returns.
Usually, an increase in the BoE means an increase in the cost of borrowing for households as well – depending on the loan you have.
If you have a tracking mortgage that follows prime rates, you can expect your interest payments to increase.
That’s because it is directly linked to the prime rate.
Households with fixed mortgages won’t see an immediate increase in payments because they’re locked into an interest rate for a certain period of time.
The standard variable rate (SVR), which borrowers apply after the mortgage repair is completed, may also increase.
According to AJ Bell, yesterday’s move means a typical mortgage holder on SVR will see their bill increase by £35 a month.
And according to research firm MoneyFactsCompare, a 0.25% increase on the current average SVR of 7.37% would add around £780 to the total return over two years.
However, some banks are choosing NOT to transfer the latest increase to their SVR borrowers.
“Lenders are free to increase or decrease their SVR as they see fit and will be affected by broader market conditions, costs,” said Nicholas Mendes, director of mortgage engineering at John Charcol. general fee, base rate.”
He added that anyone currently using SVR or running out of their flat rate should check to see if they can get any new deals.
The markets that lenders use to price mortgage costs have stabilized since being shaken by the disastrous Minimum Budget in September.
The Bank of England’s prime rate is now expected to hit a peak below the 6% previously feared.
That means mortgage rates have fallen in recent months, whereas they normally go up when rates rise.
We list major banks and construction associations that will not increase SVR for borrowers following BoE announcement.
It should be noted that even if your SVR doesn’t increase, these rates are usually higher than fixed deals.
But while repairs can save you money now, you could end up paying more later if interest rates drop later.
We also explain how to get the best deal on your mortgage below.
L&C finance expert David Hollingworth said: “Lenders have generally approved of the rate hike and that has seen some lift their SVR from 3.59% before the base rate. copies start to increase in December 2021 to 7.99% after yesterday’s increase.
“That makes SVR an expensive place, so borrowers should consider whether there are better options, especially if they use SVR as a holding position after the Budget is in place. small, which has created a lot of volatility in mortgage rates.
“Even if some lenders don’t raise rates, it’s not rates that can compete with the fixed and tracked deals currently on the market.”
But he cautions that borrowers should not predict what will happen, and do what’s best for them.
Big street bank HSBC has confirmed to The Sun that it will not pass the rate hike on to SVR borrowers.
The only loan that will grow are its track mortgages, which grow with the increase in the prime rate anyway.
HSBC said rates, including SVR, will be further reviewed.
Its current SVR for residential mortgages is 6.99% as of March 1, 2023.
Another big-name bank, Santander, has confirmed that it will not raise interest rates on variable-rate borrowers.
Instead, Santander and Alliance & Leicester’s SVR will remain unchanged at 7.50%.
It comes after a rate hike following the previous BoE update.
Skipton Construction Association
Skipton Building Society chose to keep both the SVR and the MVR (mortgage variable rate) at current levels.
For mortgage holders on these types of loans, their interest rates will be frozen at 6% and 6.29%, respectively (the .
Charlotte Harrison, Skipton’s CEO of home finance, said: “For the millions of people who are about to move out of a fixed-rate mortgage product over the next few months and potentially switch to SVR, the increase in interest rates Base rate is not welcome news.
“And to those with whom I can share that Skipton will not increase our MVR or SVR due to today’s prediction announcement.
“This means that for the majority of our mortgage customers – who do not use the products linked to the prime rate tracker – there will be no increase in payments. their math.”
Coventry Building Association
The Coventry Building Association will also keep prices for its SVR customers.
Lenders said they felt it was in members’ best interest to keep rates unchanged.
“Whether our members are saving for their first home, entrusting us with their lifetime savings, or taking out a loan to buy their dream home, our goal is to consistently deliver great value both now and in the future. future.”
For borrowers on SVR, that means they won’t see it up from 6.99%.
What are other banks doing?
Barclays’ mortgage rate change will take effect June 1, following yesterday’s announcement.
Here’s how much they’ll add:
- Barclays UK residential SVR to increase from 7.74% to 7.99%
- Barclays UK BTL SVR to increase from 8.74% to 8.99%
Virgin Money says only a small number of its mortgage customers are not covered by tracking rates and fixed rates.
Its SVR is under review.
Nationwide is currently studying the implications of this latest Bank Rate change for SVR borrowers and says it will announce any rate changes soon.
A Metro Bank spokesperson said: “In keeping with the Bank of England’s hike in its prime rate to 4.5% from 4.25%, we are updating all mortgage products that track interest rates. base rate of the Bank.
“We are confident that our diverse mortgages will continue to meet the needs of our customers.”
It expects all the changes to go into effect at the next monthly payment, but it will officially confirm this on its website for customers in the next few days.
TSB has yet to release an update on its SVR.
Leeds Building Association
Leeds BS is looking into the potential impact of the latest change on the BoE’s prime rate.
Yorkshire Building Association
After BoE raised YBS did not make a decision on whether to make any changes to its SVR.
The Sun has yet to receive a response from Lloyds on the impact of the BoE increase on SVR borrowers.
We will update this story when we hear back.
How to get the best deal on your mortgage
If you’re looking for a traditional mortgage, getting the best rate is entirely dependent on what’s available at any given time.
But there are several ways to get the best deal.
Usually, the larger the deposit you have, the lower the rate you can get.
If you’re on a mortgage and your loan-to-value ratio has changed, this can also help you access better rates than before.
Changing your credit score or getting a better salary can also help you access better rates.
If you have a fixed rate, you may see a higher interest rate at the end of the current term after the BoE rate increases.
And if you are about to close a fixed deal then you should look for new deals now.
Sometimes, you can lock existing transactions up to six months before your current transaction ends.
Leaving a fixed trade early will often come with an early exit fee, so you want to avoid this additional cost.
But depending on the cost and how much you could save by switching versus sticking, it might be worth paying to leave the deal – but compare the costs first.
To find the best deal, use a mortgage comparison tool to see what’s available.
You can also visit a mortgage broker so they can compare for you, but you may have to pay for this service.
It might cost a few hundred pounds but it could save you thousands of dollars on your mortgage overall.
You will also need to factor in the mortgage fee, although some do not charge or you can add it to the cost of the mortgage, but be aware that it means you will pay interest on it and thus that will cost more money. long-term.
You can use a mortgage calculator to see how much you can borrow.
Keep in mind that you’ll also have to pass your lender’s strict eligibility criteria, including an affordability check and a review of your credit record.
You may also need to provide documents such as utility bills, proof of benefits, last three months pay slips, passport and bank statements.
Do you have a money problem that needs sorting? Get in touch by emailing email@example.com