UK Mortgage Providers Giving SVR Borrowers a Reprieve

By: MoneyFacts

Moneyfacts UK Mortgage Trends Treasury Report data, not yet published, highlights that the average standard variable rate (SVR) has increased since the base rate rise on 2 November, as expected. Despite this, it falls short of the anticipated 0.25% rise, instead increasing by 0.14%.

Charlotte Nelson, Finance Expert at Moneyfacts, said:

“Many would have predicted that a 0.25% rise in the base rate would translate to a similar increase to the average SVR. In fact, just 56% of providers have passed on a rise to their SVR, with seven of them choosing to increase their rates by less than the 0.25%, which has caused the average SVR to rise more modestly.

“The 0.14% increase to the average SVR is in stark contrast to the average two-year tracker rate mortgage, which has seen lenders pass on the full rate rise. As a result, the average two-year tracker mortgage rate has increased from 1.77% in November to 2.02% in December.

“Historically, a base rate rise would mean that all variable rates would increase too – and it would be more of a question of when, not if, they would do so. However, this time, providers who are keen to be seen on the side of the borrower may have opted to either not increase by the full amount, or not pass on the rate rise at all.

“The Moneyfacts UK Mortgage Trends Treasury Report shows that borrowers coming off their two-year fixed rate mortgage today will have more incentive to switch from their SVR, similar to the rise back in April 2008. Providers know that a base rate rise will spark an interest from borrowers to remortgage for a better deal, so they will want to minimise the number of borrowers switching to other lenders by keeping their SVR the same.

“Borrowers may feel they are getting a reprieve from the full effects of the base rate rise, but when the highest SVR is currently priced at 6.08%, it may be little consolation to know that some SVRs have not seen a rate rise. In fact, borrowers could save £192.66* a month by switching from the average SVR to the average two-year fixed rate (2.35%).

“The smaller than expected rise to SVRs shows that perhaps the base rate had more of an impact on the mindset of the Bank of England and providers alike than on the rates themselves, which may set the ball rolling for further rate rises in the future.”

*Based on a £150,000 borrowing amount on a repayment only basis over 25 years

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