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Lloyds rewrites SVR rulebook for new borrowers

Lloyds rewrites SVR rulebook for new borrowers

Category: Mortgages

Updated: 28/05/2010
First Published: 28/05/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Borrowers hoping to secure a new mortgage deal with Lloyds TSB and Cheltenham & Gloucester have been struck a blow after the lender announced new customers will face a higher standard variable rate (SVR).

Following a promise by the bank that its SVR would stand no more than 2% above the base rate, existing borrowers whose mortgage deals come to an end currently revert to an SVR of 2.5%.

However, it has been revealed that from 1 June, anyone taking out a new mortgage with the lender will move onto its new homeowner variable rate once the deal expires.

This currently stands at a rate of 3.99% and, not being linked to the base rate in any way, could be adjusted by the lender at any time.

Existing borrowers whose mortgage deals have not yet come to an end will still revert to the old SVR of 2.5%. This could, however, rise should base rate start to increase.

"When Lloyds TSB made the decision to guarantee its SVR it never expected base rate to go so low," said Michelle Slade, spokesperson for Moneyfacts.co.uk.

"The lender has seen their balance sheet dented by borrowers reverting to the record low rate of 2.50%. Many of its borrowers are understandably opting to stay put and overpay their mortgage rather than remortgage to a new deal at a higher rate."

Despite the hike being unwelcome, Ms Slade said the new rate of 3.99% was still well below the current market average of 4.73% for standard variable rate mortgages.

The news comes a year after Nationwide Building Society made a similar move to introduce a higher SVR for new borrowers.

Having made a similar guarantee with respect to base rate as that of Lloyds, its existing customers had also been reverting to an SVR of 2.5%.

The borrowers it has attracted in the past year will move to an SVR of 3.99% when their deals expire.

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