Lenders may be raising mortgage rates

A recent report has indicated that many lenders may be looking to raise their mortgage interest rates as a result of the turmoil that has been caused by the global credit crunch that has swept across the UK and other parts of the world.

The credit crunch was sparked in the sub-prime sector of the United States and made its way across the Atlantic in August of this year. Since this time many areas of the financial sector have been affected, and there have been some high profile victims of the credit crunch, the most prolific of which is probably Northern Rock.

Borrowers are now being warned that they may face increased mortgage lending costs and higher interest rates. One mainstream lender, Standard Life, has already raised its interest rates in the light of the effects of the credit crunch. This comes despite the fact that the base interest rate set by the Bank of England was left on hold this month, with rates remaining unchanged at 5.75%, the level at which they have stayed since July of this year.

The Standard Life variable rate is now set to go up to 7.46%, which reflects a rise of 0.15%. It is predicted that a number of other mainstream lenders are likely to follow suit and raise their interest rates, which is bad news for borrowers as it means that they will have to cope with increased borrowing costs despite the fact that the base rate has remained unchanged.

An official from Standard Life stated: "The change in SVR is a consequence of significant changes to the mortgage market in recent months." Another industry professional added: "This is a stark warning for anyone on an SVR rate or, indeed anyone with a rate linked to the SVR, as with many discounted rates. SVR is a managed rate, controlled by the lender, and it can and does move when base rate is stable."

Tom Smith
2nd November 2007

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