Co-op puts up mortgage rates
Homeowners face more misery after the Co-operative Bank announced yesterday that it would put up its standard variable rate (SVR) by 0.5%.
The rise, which will come into effect on 1 May, will take the bank's SVR to 4.74%.
The move will affect around 54,000 mortgage holders, adding £15 a month to typical repayments. This equals £180 a year.
The bank has blamed "changing conditions in the mortgage market and the increased cost of funding," for the rise.
The bank is the fourth mortgage lender to put up its rates in recent weeks. Halifax, RBS and the Bank of Ireland have all increased their SVRs.
"This news is another blow to homeowners who could see their monthly costs shoot up at a time when their finances are already stretched to the max," says Michael Ossei, personal finance expert at uSwitch.com.
"Many of those on tracker mortgages have been enjoying drastically lower mortgage payments over the last few years as a result of the low base rate.
"However, this will bring them back down to earth with a bang. And because these increases are nothing to do with the base rate, which still shows no signs of budging, the blow won't even be softened by a corresponding increase to savings rates," he adds.
Every mortgage lender has a standard variable rate of interest, or SVR, on which it bases all its mortgage deals, including fixed and discounted rate and tracker mortgages. When special deals come to an end, the terms of the deal usually state that the borrower has to pay the lender’s SVR for a period of time or pay redemption penalties. The lender’s SVR is, in turn, based on the Bank of England’s base lending rate decided by the Bank’s Monetary Policy Committee (MPC). Every time the MPC raises its rate, mortgage lenders generally increase their SVR by the same amount but when the MPC lowers its rate, lenders are often slow to pass this on or don’t pass on the full cut to borrowers.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.