On top of already declining numbers of home sales, two of the UK’s leading mortgage lenders are announcing a rise in the cap on their Standard Variable Rates which may make homeownership even more problematic. Halifax, which was reportedly the largest mortgage lender before the credit crisis, is bringing their rates up by .75 points within a three month period. The SVR will go from 3 points to 3.75 points.
The problem now facing approximately one million of those with existing loans will be whether or not this increase will affect them. If the rates do move up across the board, those paying a low 3.5% will be faced with rates at 4.5% which might force them into foreclosure. However, Halifax has not said that they will actually be increasing the rate, but as reported by the Telegraph, a great many brokers believe this will happen in the near future for those million borrowers in question.
Now that RBS has raised their rates and Halifax is poised to follow suit, it is feared that other banks will follow the lead, making it a nightmare for borrowers throughout the UK. This could be the first link in a chain of events which could cause a domino effect in mortgage lending. Furthermore, analysts state emphatically that if Halifax were not set to begin raising rates there would have been no reason to make these plans because of the backlash the negative publicity would cause.
A spokesperson for John Charcol, Ray Boulger, said that borrowers should expect to see an increase to 3.5% as early as the end of this month, by 31 March. It should further be known that although Halifax has yet to make a formal announcement, other banks have already jumped on the bandwagon and have begun raising rates, RBS by as many as three points. What this means to the housing and mortgage markets is anyone’s guess at this early stage.
