Borrowers Struck As Interest Rates Rise

The Halifax, Britain's largest mortgage lender, has already passed on last week's quarter-point hike in interest rates to its borrowers, lifting its standard variable rate (SVR) to 6.75 per cent from 6.5 per cent.

The increase means the monthly repayments on a £100,000 variable-rate repayment mortgage with the halifax have risen by £15 to £690. Repayments on a £250,000 mortgage are up by £39 to £1,727. For the growing number of borrowers on tracker deals, the additional 0.25 percentage points will have already kicked in.

Alliance and Leicester will also up its rates for existing borrowers by 0.25 per cent on September 1. The One Account, owned by Royal Bank of Scotland, was among the first to respond to the Bank’s quarter-point hike in interest rates last week.

The rate on its flexible mortgage went up 0.35 points to 6.3 per cent for loans accounting for more than 85 per cent of the property. The change was a tenth of a percent higher than the base-rate rise.

Borrowers with Norwich & Peterborough Building Society have been hit twice — the lender has levied the quarter point, despite already increasing its SVR by 0.19 percentage points on June 16.

Other lenders such as the NatWest are currently reviewing their rates but are expected to follow suit in the next few days. Nationwide is due to announce changes to its mortgage rates tomorrow.

The impact of the rate rise will be felt most keenly by borrowers with interest-only deals. On a £200,000 loan, an interest-only borrower would see outgoings rise by £41.67 a month.

Howard Archer, the Global Insight economist told Times Online: "A significant minority of people have borrowed to the hilt and small increases in interest rates can have a much more damaging effect than in the past.

"Interest rates are just one more thing weighing on borrowers who also have to deal with soaring utility bills, petrol prices close to £1 a litre and modest earnings growth."

Last week, figures showed that personal insolvencies rose almost 70 per cent to hit a new peak in the three months to June. Property repossessions also recorded a steep year-on-year rise, with the number of eviction orders increasing by 20 per cent in the second quarter from a year earlier.

Mark Sands, director of personal insolvency at accountants KPMG, now estimates a record 100,000 personal insolvencies in 2006.

James Cotton, of London & Country Mortgages, advised borrowers on high SVRs to move their mortgage to a cheaper provider. Ray Boulger, a spokesman for John Charcol, the mortgage broker, said those intent on locking in to the best fixed-rate deals had to move quickly. "If borrowers are adamant about locking into fixed-rate deals they should move quickly as lenders will put up their rates over the next few weeks," he said.

The Times, August 10th 2006