Variable rate customers squeezed by lenders
Thursday, 23 June 2011 2:10 PM
Variable-rate mortgage customers are being squeezed by lenders failing to pass on cuts in the base interest rate, new research has suggested.
A study by Which? Money found that 95 per cent of lenders failed to fully pass on cuts in the base interest rate to their Standard Variable Rate (SVR) mortgage customers.
With many borrowers trapped on SVR mortgages, the consumer champion warned that a rate increase could leave thousands of households in financial difficulty.
A one per cent increase to the base rate would add over £50 to the monthly repayments of someone with a £100,000, 20-year mortgage, Which? said.
The study found that more than a fifth of lenders have increased their SVR since the base rate hit an all time low of 0.5 per cent in March 2009.
Cheltenham & Gloucester and Lloyds TSB Scotland were the only lenders who are part of the four biggest banking groups to pass on the full cut.
At 6.08 per cent, KRBS has the highest SVR on the market, Which? said, more than 12 times the base rate. The five other direct lenders with the highest SVRs are all building societies.
The average SVR is now 3.48 per cent above the base rate, compared with 1.95 per cent in September 2008.
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