Eurozone crisis forces Lloyds to raise SVRs
Lloyds Banking Group has become the first big bank to raise Standard Variable Rates, prompting suggestions that the era of borrowing at rock-bottom rates is drawing to a close as the eurozone crisis deepens.
The move will affect more than 175,000 borrowers who took out mortgages from Bank of Scotland and The Mortgage Business, who will see their rates rise from 4.84% to 4.95% on November 1.
Many will not be able to re-mortgage. Bank of Scotland, which closed its books to new business in 2009, specialised in self-cert mortgages and also those of more than £1m.
The Mortgage Business closed to new business in 2008
Other lenders are also likely to raise SVRs in the near future because of a rise in the costs of funding mortgages caused by the Eurozone crisis.
According to Which magazine, about 40% of borrowers are on SVRs, equating to about four million.
Three-month Libor, which reflects rates at which banks lend to each other, has been on the rise, climbing from 0.86% to 0.97% in the last two months.
Last week, Barclays, Santander and Northern Rock all raised the cost of their trackers for new customers, as well as fixed rate mortgages, which are linked to swap rates. Five-year swaps were 1.81% last week, a fall from 1.90% the previous week, but a rise from 1.63% two months ago.
For example, Barclays is raising the cost of its five-year fix at 70% LTV by 0.35%. Santander raised its fixed rate deals by 0.3% and Northern Rock raised the cost of its trackers by 0.2%.
It looks like interest rates may have bottomed out and the tide is starting to turn.
Several building societies have already raised their SVRs. For example, last year Skipton pushed up its rate from 3.5% to 4.95%. (The same as Lloyds) Many other Building society SVRs are above 5%