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?