Which? Money has performed new survey in which 95 per cent of lenders seem to fail to fully pass on cuts in the base interest rate to their Standard Variable Rate (SVR) mortgage customers. Furthermore, as many borrowers are trapped on SVR mortgages, a rate increase could leave thousands of households in financial difficulty.
A one per cent increase to the base rate would add over £50 to the monthly repayments of someone with a £100,000, 20-year mortgage. Which? research shows that seven in ten people are worried about mortgage rates and two in ten fear repossession.
More than a fifth of lenders have increased their SVR since the base rate hit an all time low of 0.5% in March 2009. Cheltenham & Gloucester and Lloyds TSB Scotland were the only lenders who are part of the four biggest banking groups to pass on the full cut.
At 6.08%, KRBS has the highest SVR on the market – more than 12 times the base rate. The five other direct lenders with the highest SVRs are all building societies.
The average SVR is now 3.48% above the base rate, compared with 1.95% in September 2008.
Peter Vicary Smith, Which? CEO comments :
“Millions of people are on variable rate mortgage deals and for many a rate hike could mean they’re facing real financial difficulties.
“Banks have enjoyed increased margins on mortgages for the last few years and when the base rate rises again, few lenders will be able to justify passing the full amount onto their SVR customers.”
Source : Which?
