Today Standard Life Bank announced its standard variable mortgage rate would increase by 0.15% to 7.46% or 7.66% depending on the loan to value of the mortgage.
It is very rare to see a mortgage lender increase its standard variable mortgage rate outside a Bank of England base rate change. It could very well be the first sign that the mainstream 'prime' mortgage is feeling the pinch of the credit crisis.
Even with this latest mortgage rate increase, Standard Life Bank's standard variable mortgage rate remains in line with the market average. While none of Standard Life's mortgage rates are directly linked to the standard variable mortgage rate, the increase will still affect many existing mortgage borrowers who have reverted to a standard variable mortgage rate once their fixed rate mortgage deal has elapsed.
For those already paying the standard variable mortgage rate, this shock move should be the straw that finally breaks the camel's back and encourages them to find a better mortgage deal.
But what might cause more shock and confusion is for mortgage borrowers who have secured a fixed rate mortgage with Standard Life, but added the original mortgage arrangement fee to the mortgage loan. Any mortgage arrangement fees added to a Standard Life mortgage are charged at the standard variable mortgage rate rather than the fixed mortgage rate, so even fixed rate mortgage borrowers will see a rise in their monthly mortgage repayments as a consequence of this change. With mortgage arrangement fees rising as high as £2000, it's very likely that many mortgage borrowers will be in this boat.
This is a stark warning for anyone on a standard variable mortgage rate, or anyone with a mortgage rate linked to the standard variable mortgage rate, as with many discounted variable rate mortgages. The standard variable mortgage rate is a managed rate, controlled by the mortgage lender, and it can and does move when Bank of England base rate is stable.
Standard Life Bank is one of the top 20 mortgage lenders, so it could very well set a precedent for other mortgage lenders to follow suit.
Mortgage Best Buys - Variable rate mortgages
Mortgage Best Buys - Discounted variable rate mortgages
Mortgage Best Buys - Fixed rate mortgages
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