Hundreds of thousands of Santander customers will be hit by hikes to their standard variable mortgage rate (SVR) from today.
Homeowners will see their SVR rise from 4.24% to 4.74%. This will lead to a £26 per month or £312 per year rise in payments on a £100,000 repayment mortgage.
- Santander SVR hikes come into force today
- Rates rise from 4.24% to 4.74%
- A&L mortgage customers unaffected
While Santander includes the former Alliance & Leicester bank, A&L mortgages are branded separately and are NOT subject to a rate hike. Only Santander-branded home loans are affected.
The bank blames the move on rising costs.
An SVR is the default rate that mortgages tend to switch to once an initial fixed or tracker deal period ends.
Bank of Ireland, Clydesdale/Yorkshire Bank, the Co-op, Halifax and ING Direct have also all raised their SVRs this year. RBS also raised some variable offset mortgage rates.
Fears have been raised that many people hit by the SVR increases will struggle to switch to a cheaper deal and could find themselves trapped. Average SVR rates are now at their highest levels in three and a half years.
The typical rate climbed to 4.27% by the end of August, the highest since spring 2009, according to Bank of England figures.
Some brokers think more lenders could follow. David Hollingworth, associate director of London and Country Mortgages, says: "If you're on an SVR, you can't just feel you are sitting pretty because nothing is happening with base rates.
"I would not be surprised to see other lenders following."
Funding for lending hope
While in its early stages, a funding for lending scheme which began in August has sparked some increased competition among mortgage lenders, although much of this has been concentrated around borrowers with larger deposits of around 40%.
The scheme gives lenders access to cheaper cash that they can lend out.
Banks and building societies say mortgage availability has been boosted by the scheme, although they have tightened their borrowing criteria and do not expect this to loosen in the next few months.
The Council of Mortgage Lenders (CML) suggests some rates may still rise, but to a lesser extent than they would have done without the plan.
Additional reporting by the Press Association.