Existing owners face brunt of UK mortgage hikes

London: More than a million homeowners face higher mortgage repayments after several high street lenders raised rates on Tuesday.

Several lenders, including Halifax, Co-operative Bank and Clydesdale and Yorkshire Banks, have raised mortgage rates by as much as 0.5 percentage points for existing customers. These increases mean UK consumers will face an additional £300 million in repayments over the next year, according to consumer group Which?, placing further pressure on squeezed household incomes.

Over 800,000 mortgage customers with Halifax, the UK's biggest mortgage lender, will see their monthly payments rise after the bank increased its standard variable rate (SVR) — which customers revert to when a fixed-rate or tracker deal ends — from 3.5 per cent to 3.99 per cent. A homeowner with a £200,000 repayment mortgage will see their monthly payments rise by £51, or £612 over a year.

Mortgage customers with Co-operative Bank, Clydesdale and Yorkshire Banks, and Royal Bank of Scotland/NatWest will also face higher repayments.

Co-operative Bank has increased its SVR by 0.5 percentage points to 4.74 per cent, affecting around 54,000 customers, while a further 30,000 borrowers with Clydesdale and Yorkshire Banks will now pay more after the lenders raised their SVR by 0.36 percentage points to 4.95 per cent. RBS/NatWest increased variable rates for its offset mortgage customers on March 1, and has now raised rates for One Account customers by 0.25 percentage points to 4 per cent.

Two hundred thousand customers are affected in total. A further 100,000 borrowers with Bank of Ireland and Bristol and West will see their mortgage payments jump next month when the bank raises its SVR by 1 percentage point to 3.99 per cent.

Further squeeze

Experts warned that the latest rises will place a further squeeze on household incomes. "The increases will put some households under pressure," said Ray Boulger of John Charcol, the mortgage broker. He noted that so-called mortgage prisoners, borrowers who cannot move home or remortgage as a result of lenders tightening their loan criteria, will be impacted the most, particularly those who have interest-only mortgages or those with little equity in their property.

Last month, the Financial Services Consumer Panel, a panel that advises on consumer issues, warned that the "vulnerability" of these homeowners has been highlighted by the recent hikes in SVRs.

— Financial Times