Mortgage rise hits thousands of Santander customers
Thousands of Santander customers were facing a hike in mortgage costs today after the lender increased its standard variable rate by half a per cent.
October's rise to 4.74% will impact on a few hundred thousand people, although 2011's second biggest mortgage lender declined to give an exact figure. Santander said its SVR mortgage holders will see an average increase of £26 a month or £312 a year for a £100,000 mortgage as a result of the change, which it expects will take effect from October 3. It is also increasing its SVR cap margin, which is the maximum above the Bank of England base rate it can charge, from 3.75% to 4.99% from September 24.
Santander blamed the increased cost of funding a mortgage, adding that the cost of running a bank in the UK "has increased dramatically". It comes as mortgage lenders generally have been tightening their borrowing criteria, leading to concerns that people will struggle to switch deals and some could find themselves trapped.
More than a million home- owners saw their mortgage rates increase in May, as lenders such as Halifax, the Co-operative Bank and Clydesdale and Yorkshire Banks raised their SVR rates, while the Bank of England base rate remains at a historic 0.5% low. An SVR is the default rate mortgages tend to switch to once an initial fix or tracker deal period ends.
Santander said the move is prompted by rising costs and savings rate hikes.