Mortgage Rate Misery For One Million Borrowers
More than a million home owners will see the cost of their mortgage payments increase from Tuesday. The majority of those affected are Halifax customers, who could typically find themselves paying nearly £200 extra a year, following a series of recent rate rise announcements from lenders. The Co-operative Bank, Clydesdale Bank and Yorkshire Bank are also among those raising rates from Tuesday, blaming the weak economy and the increased cost of funding a mortgage.
Fears have been raised that people could struggle to switch to a better deal as lenders have already started tightening their borrowing criteria, triggering a fall in the proportion of mortgages being approved.
Halifax is raising its standard variable rate (SVR) from 3.5pc to 3.99pc, affecting 850,000 home owners. Borrowers revert to paying an SVR when their fixed rate deal ends. With the average balance of those affected circa £67,500, payments will be increasing by approximately £16 a month to just under £500 on a capital repayment mortgage with 15 years remaining, an increase of nearly £200 over the year. Someone with a higher balance of £100,000 would pay £24 extra a month, with monthly repayments going up to £740, the equivalent of nearly £300 more annually.
Co-operative Bank, RBS-Natwest, Clydesdale and Yorkshire Banks’ rates will also be rising and borrowers who have not managed to pay off much of their loan or are in negative equity could find themselves stuck with their existing lender and unable to switch to another provider.
In addition borrowers will encounter tougher and more probing questions to prove they can pay back loans when stricter mortgage rules are brought in during the summer of 2013. Greater restrictions are set to be placed on mortgage loans due to a clampdown by the Financial Services Authority (FSA) on irresponsible lending, to make sure borrowers can only take out deals they can afford.
On a more positive note Santander has launched a range of first time buyer mortgages which is says are designed to help borrowers trying to get their first step on the property ladder. The new range of mortgages, offers three and five year fixed rates and fees as low as £99.
With many experts still debating quite when the economy will begin to recover many existing borrowers will be looking carefully at their next deal whilst for first time buyers the advice still appears to be to save for a better level of deposit there are at least some deals appearing which will help those for whom that is not an option.