The Halifax mortgage lender has sparked the threat of a customer walkout due to increased rates, according to reports today.
The lender has announced that it is increasing interest rates on its standard variable mortgages from 3.5 per cent to 3.99 per cent, with the changes due to come into effect on 1 May. Some experts believe that the increased rates would lead to some of the Halifax’s 850,000 standard variable rate mortgage-holders having to pay some £735 a year more than at present.
It is the first such interest rate increase for three years, and has been condemned by many as a naked attempt to increase profits – although the banks themselves say that increased costs are due to the increase last year in the cost of borrowing on the wholesale markets. Many Halifax mortgage-holders may now try and jump ship, seeking cheaper mortgage deals elsewhere.
However, choice could soon be limited, as the move could lead to a decision by other mortgage-lenders to increase charges, in defiance of the Bank of England’s attempts to keep rates down by holding the base rate of interest at an historic 0.5 per cent low for the past three years.
There is also the fact that mortgage-holders without much equity in their properties will find it extremely hard to move their loans.
Halifax is attempting to sweeten the pill by offering customers the chance to transfer free to cheaper short-term fixed-rate mortgages. A two-year mortgage of this kind charges rates of 3.49 per cent for a 60 per cent loan-to-value (LTV) mortgage, while a 75 LTV loan offers a 3.74 per cent rate.