ROOF Blog

Tens of thousands of borrowers face a shock jump in mortgage payments after Skipton Building Society confirmed plans to raise its standard variable rate from 3.5 per cent to 4.95 per cent. The move, to take effect from 1 March, will raise mortgage repayments by up to 40 per cent for some borrowers, adding almost £200 a month to repayments on a £150,000 interest-only loan. Skipton, Britain’s fifth-largest building society, with 100,000 borrowers, previously had guaranteed that its variable rate would not rise while Bank of England base rate stayed at 0.5 per cent, but it has cited a clause in its loans’ small print allowing it to ignore the promise in ‘exceptional circumstances’. Skipton has blamed its decision on ‘unprecedented’ competition in the savings market from National Savings & Investments (NS&I), the Treasury-backed savings provider, and state- controlled banks. Experts say that other building societies are likely to follow suit and raise interest rates for homeowners on an SVR, the ‘revert’ rate that borrowers switch to when a mortgage deal ends.

Banks were today accused of profiteering from homeowners during the recession, as it emerged that the average interest charged on variable-rate mortgages is 4.2 per cent higher than the Bank of England’s base rate.

The average Standard Variable Rate mortgage now charges interest rates of 4.7 per cent, down only one per cent over the past year – when the base rate fell by 2.5 per cent. Vera Cottrell from consumer watchdog Which? said the variable rate market was ‘raising serious concerns’.

She said: ‘Lenders are getting away with charging very high mortgage rates right now, many have an incredibly high margin between base rate and the interest being charged. That’s offering consumers a poor deal.’