Mortgages are set to soar as banks push up rates
MILLIONS of homeowners are facing “shocking” mortgage rises as banks ramp up their lending rates.
Hard-pressed families will be punished in the coming weeks despite base interest rates being at a record low for three years.
Yesterday the Co-operative Bank, which prides itself on its ethical lending policies, pushed up its standard variable rate by 0.5 per cent to 4.74 per cent.
That forces a typical payment up £15 a month, or £180 a year. But as other banks rush to join in, worst hit borrowers could see bills soar by up to £840 a year.
The higher payments, which start on May 1, means the Co-op joins Clydesdale and Yorkshire banks, RBS-Natwest, Halifax and Bank of Ireland in increasing its terms.
Experts say homeowners are facing a “mortgage time-bomb”. Yet savers, who out- number borrowers seven to one, are seeing no growth in their rates for investing.
William Hunter, of Hunter Wealth Management, said: “Lenders are upping their rates for borrowers but are far less active when it comes to upping their rates for savers. Savers, as ever, are on a hiding to nothing.”
Consumer champion Marc Gander said: “It’s shocking...a nice thank you gesture from the banks to all those taxpayers who bailed them out.” Estate agency founder Peter Hughes called the latest rate hike “another hammer blow for homeowners” that would only serve to hold back the property market.
He added: “Once again, it feels like lenders are looking after their own backs. Worst of all, other lenders are likely to follow. There is comfort for them in numbers.”
The average Co-operative Bank borrower has a balance of £48,000 to pay over 11.5 years. Their monthly bill will go up from £440 to £455.
But some borrowers will have to find an extra £840 a year if, based on calculations for a typical interest only loan and property, their bill shoots up from £605 to £675.
Michael Ossei, personal finance expert at website uSwitch.com, said: “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. 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.”
Millions of homeowners with a standard variable rate mortgage are already paying 4.16 per cent – the highest rate since March 2009.
Chris Taylor, chief executive of insurer MarketGuard, said: “SVR mortgages are a time-bomb waiting to happen.”
Marc Gander, founder of the Consumer Action Group, said: “Banks have never had it so good.
“They are doing fabulously well. It amazes me that they can’t share some of the burden the rest of us are under.
“If they are saying they have to pass on rising costs, why can’t they pass some of the good times on as well as the bad? These rises come at a time when people need them least of all.”
Clydesdale and Yorkshire banks are increasing their SVRs from 4.59 per cent to 4.95 per cent. RBS- NatWest is ramping up rates on its Offset and One accounts by 0.25 per cent, taking them to four per cent.
Halifax raises its SVR from 3.5 to 3.99 per cent. The Bank of Ireland is increasing its SVR from 2.99 to 4.49 per cent in two stages.
The Co-op Bank said it was facing higher costs to fund mortgages, as well as “changing conditions in the mortgage market”.
This post has been edited by tinbin: 03 April 2012 - 02:12 PM