More and more lenders are putting up the mortgage rates on their own standard variable rate mortgages, despite the base rate staying at 0.5%. This is despite the fact that traditionally, Lenders apply have always used the base rate as a measure of their own rates. This increase has gone unnoticed by thousands of homeowners who are unaware that they may be paying over the odds for their SVR products.
Skipton building society is one of the lenders who increased the mortgage rates on their SVR products from 3.5 to 4.95%, despite the base rate not changing. This change will cost people a significant amount of money. A Skipton spokesman said that the rates were still competitive at 4.95%.
Many other banks and building societies may well follow suit and there is a snowball effect from then on. The more that do increase their mortgage rates, the more will follow due to increased pressure in the marketplace.
The remortgage sector has seen a rise in the amount of people moving from their banks current SVR and onto fixed rate products, a move which is recommended by Clare Francis of Moneysupermarket.com.
The problem with being on the banks SVR is that they can increase it at any time, a fixed rate mortgage will be more expensive in the short term but may save you money in the long term.
There are still fixed rate mortgages in the market place with rates of under 3%, it is just a case of looking around on best buy tables on sites like Moneysupermarket.com to see who is offering them.
Your own bank will not tell you about other, cheaper rates, for obvious reasons, so it pays to shop around. Some experts believe that remortgage rates may return to the highs of the past and possibly reach 8% in 3 years. This would be disastrous for those who stayed on flexible mortgages, should it come to fruition.
Whilst the base rate stays at 0.5% it creates a false sense of security, people would be well advised to save for the future increase or to look at fixed rate mortgages as a viable option.
It is well worth getting independent mortgage advice from a qualified adviser. Make sure that they are independent and that their fees, if any, are transparent.