/ Money

Mortgage rates rise, despite record low base rate

Halifax has announced a rise in its mortgage Standard Variable Rate (SVR) from 3.5% to 3.99%, affecting 850,000 customers. This is despite the Bank of England continuing to hold the base rate at a record low of 0.5%.

Halifax’s action, which it will implement on 1 May, follows a mortgage rate rise for 200,000 customers at RBS and Natwest.

Santander has also announced that it will be increasing rates of products offered exclusively through intermediary mortgage advisers.

Mortgage rate rises don’t add up

For a customer with a £150,000 repayment mortgage, Halifax’s new SVR will increase their monthly payment by around £38 a month, or £460 a year. At a time of pay freezes, rising petrol and energy bills, this is the last thing hard-pressed families need.

Many of the Halifax customers will be ‘mortgage prisoners’, unable to move to other lenders due to the lack of competition. Over a quarter of Halifax customers will either be in negative equity, or have such small deposits that they’ll struggle to switch their mortgage.

It’s also important to remember that Halifax got its dominant position in the mortgage market through massive government subsidies and bail-outs. Rather than running its business more efficiently, it seems Halifax will be profiting from its captive customer base instead.

Claw back bonuses, don’t put up rates

Halifax says that it has to increase the rate to reflect the higher costs it’s incurring in its business. But, a look at its current funding costs indicates that they are no higher (compared to its mortgage rates) than when it set its mortgage SVR to 3.5% in March 2009.

I might also suggest that there are other actions the bank should take to control its costs. This is a bank which paid £375 million in ‘bonuses’, despite the share price falling by 45% in the last year. Halifax will earn just £300 million more from its latest mortgage rate increase.

Of course, Halifax isn’t the only bank giving out bonuses – RBS is also state-owned and has handed out bonuses while similarly putting up mortgage rates for some of its customers.

So, are you affected by these mortgage rate increases? What impact will such rises have on your finances?


The trouble is the tax system in this country is so complex that no chancellor knows the full effect of their actions. We are now seeing the consequences from taxing the banks which ultimately the customer has to pay for. This reduces disposable income which is needed ultimately to spend on goods and services which in turn gets the economy moving. The banks have a monopoly and it won’t be long before all banks follow suit and increase their rates. The problem now is the Bank of England will be hard pushed to increase its rate any time in the near future therefore restricting any manoeuvrability they have in small adjustments to get the economy moving. If family allowance is taken away next year this further restricts peoples spending and the markets lose confidence and before we know it we are back in another recession. When are these people running our country gong to learn that any major change has a knock on effect somewhere else down the line. What we really need is a rethink on how the overall system works and not focus on just one particular area of the economy.

Sophie Gilbert says:
7 March 2012

Mortgage providers seem to ignore the base rate the same way utility companies ignore the price of fuel.

Still it will show those protected by a historically low base rate – what it was like when us older folk had to cope with 15% plus mortgages and lost their homes. Particularly those that insist we older folk “downsize” so the young can take advantage of superb unsustainable mortgage rates,

Karl says:
9 March 2012

My small boys are always complaining that it is things are not ‘fair’. Unfortunately life is not fair. If it was, the bankers who lost billions would be forced to give back their private fortunes made in the good times as a penalty for gambling the farm on suspect property deals and losing.

This is a bank that has been saved by the tax payer and yet feels the need to extort more revenue from its customers. Many of its customers have lower real incomes, higher food, fuel and petrol costs and real job insecurity. The really insulting aspect is the weasely argument the banks use to justify the increases. The bankers get more like politicians every day, thinking we are stupid and taking us for granted.

Unfortunately banks, like politicians give the public little choice – they are all pretty much as bad as each other. Not fair I know – but as I keep telling my boys, life is not fair.

We’re talking about this on the Podcast next week: which.co.uk/podcasts

Brian says:
9 March 2012

My mortgage base rate has risen 3 times in less than 3 years even though there has been no rise by the bank of england. They do as they like, and no one cares or wishes to do anything about it. What can you do???

Sophie Gilbert says:
13 March 2012

There is hope, Brian, some of us do care, and by joining this convo we can all try and help Which fight for us, even if they’ve admittedly got their work cut out…

Nik says:
10 March 2012

Dominic – Halifax had a dominant position in the mortgage market long before it was bailed out.
3.99% is still very, very cheap by historic standards; not so long ago anything under 10% was a good rate. If people took out a mortgage expecting it to stay at 3.5%, they were living in cloud cuckoo land.
Sure, the BOE base rate is 0.5% but the banks can’t lend it out at anything like that, it’s just not a sustainable business model, rates had to go up. No doubt you want 3% on your savings to go with your cheap mortgage? Banks need to make a profit. Only then will we, the taxpayers, get our money back.
The real losers here are savers, whose prudence is being penalised by the current interest rate policy.

My advice to those stung by the latest mortgage rate increases is to look further than the high street when arranging your mortgage. About 10 years ago, after re-mortgaging with several succesive high street lenders and taking advantage of their special offers, I went to a small independent mortgage broker. Now I am a bit of a control freak and have an inherent distrust of intermediaries, so I really don’t remember what made me decide to contact this chap. I might have picked his name out of the local newspaper or something similar. Anyway, when I met him, he was a very modest sort of person and not the sort of sharp-suited, all-talk salesman I was prepared for. He asked what I needed from a mortgage and a series of related questions. When he had established what I was looking for, he pressed a button on his laptop and came up with a long list of lenders who could provide what exactly I was looking for. I had never heard of most of them, but he had placed clients with many of them and was able to recommend several. I ended up going with the Coventry Building Society who I had never heard of but who have been excellent for the past 9 years and who have never (so far) varied their variable rate for anything other than BoE base rate changes. I would never have gone to them but for this mortgage broker, but I have been so pleased with their approach and service. I hope my experience will encourage others to be a little more choosy. I believe that the likes of Halifax and Santander have it their own way because they are on every high street and thus become the automatic choice for many people.

Julia says:
12 March 2012

I’d echo what the previous posted said – if you are able to move – then ditch these blood sucking banks in favour of the independants.
I too am with Coventry but would trust most building societies far more than one of the big banks.
Of course the best move is to be mortgage free – the last three years has made me look very differently at mortgages and I’m overpaying as much as I can to get out of this ‘trap’! I just don’t trust them any more – money under the mattress time!!

Notice that the 2 banks who are doing this are [coincidently] both the part government owned banks.
RBS (Halifax)
Lloyds /TSB

I would think that the Govt’ would have said no, unless this is part of Cameron & Cleggs re-Victorianisation of Britain master plan.

Nik I am still in shock at your posting, do you actually really believe this psychobanker babble or do you have some vested interest?

And may I remind you that we the fleeced public have already paid out this money and will never get it back, unless one sunny day the Govt’ is going to calculate exactly how much each individual has had stolen from them and make a cash refund directly to us.
To use the phrase ‘Only then will we, the taxpayers, get our money back’, is to perpetuate the myth that money in govt coffers is the same as money in our pockets.

Brian says:
13 March 2012

To M

Here, here, well said