Mortgage Holders Warned of Potential 9% Interest Rates as Bank of England Base Rate Expected to Increase
Mortgage holders with two major lenders could find themselves paying 9 per cent or more in interest if the Bank of England increases the base rate as expected this week. This alarming prospect has raised concerns among customers on the standard variable rate (SVR) at Virgin Money and Metro Bank, who already pay 9.49 per cent and 8.75 per cent, respectively. The situation could worsen if the base rate increases, causing these rates to reach 9 per cent.
High Interest Rates for Mortgage Holders at Major Banks and Building Societies
Analysis commissioned by TotallyMoney has revealed that nine of the 15 largest banks and building societies in the UK currently charge SVRs with interest rates exceeding 8 per cent. Among the major providers are Barclays, Lloyds TSB, and Co-Op Bank, all charging over 8 per cent. According to Moneyfacts, the average standard variable rate as of Friday 1 September 2023 is 8.09 per cent. However, Skipton Building Society offers the cheapest SVR at 6.79 per cent.
Expensive Deals: SVR Mortgage Rates
SVR mortgage deals are usually the costliest options offered by lenders. When borrowers transition from cheaper fixed-rate options, they often revert to SVRs. These rates typically fluctuate with the Bank of England base rate but are not guaranteed to do so. Currently, approximately 679,000 residential mortgage customers are on SVRs.
Recent Increases in SVRs
A report by Moneycomms reveals that five of the 15 largest lenders have increased their SVRs by 5.15 percentage points since late 2021, which aligns with the increase in the Bank of England base rate during that period. Skipton Building Society stands out as the only provider that increased its rate by less than 3 per cent, from 4.64 per cent to the current rate of 6.79 per cent.
Warning for Fixed Deal Customers
Experts are now cautioning individuals reaching the end of their fixed-rate deals to be aware that they may be moved to a more expensive SVR. Alastair Douglas, the chief executive of TotallyMoney, advises borrowers to check the end date of their deals to budget accordingly. Customers struggling to keep up with repayments are encouraged to contact their lenders promptly. Banks are now obliged to act in the best interests of their customers and offer flexibility, such as reducing monthly payments or extending the mortgage term—actions that are free and do not impact credit scores.
Virgin Money, when asked about the possibility of increasing their SVR further, stated that they consider the impact on their savers and borrowers in response to any base rate change. The majority of their mortgage book remains unaffected because it consists of fixed-rate products. Only 2.5 per cent of Virgin Money’s residential mortgage customers are on an SVR deal. No comment was obtained from Metro Bank for this report.
In conclusion, mortgage holders with Virgin Money and Metro Bank could be facing interest rates of 9 per cent or more if the Bank of England increases the base rate. This is a cause for concern, as customers with SVRs at these banks are already paying high rates, with Virgin Money offering the highest SVR among major lenders. It is crucial for borrowers coming to the end of their fixed-rate deals to anticipate the possibility of being moved to a more expensive SVR. By staying informed and seeking flexibility from their lenders, borrowers can effectively manage their mortgage repayments and avoid financial difficulties.