Finance News

Santander Announce Hike in there Variable Mortgage Rate

Santander is going to increase the rate of interest that borrowers have to pay on their mortgages by 0.5%, most likely from October onwards. The bank is the second biggest lender of mortgages in Britain, and it’s estimated that this could affect between 200,000 and 300,000 households, though Santander has refused to confirm the exact number of people affected by the change.

Santander originally promised that they would not increase their variable rate this year, which they seem to have decided to backtrack on. A letter sent to customers announced the rise, and industry experts believe the most likely timing that the bank will follow is to confirm the increase in September, then begin charging it in October.

Any lenders on fixed rate mortgages will not be immediately affected by this as they will stick to the rates that the bank agreed to when they took out their mortgage. However, once the fixed rate terms end, they will find themselves on the higher standard rate. The worst hit will be those already paying the standard rate, who will find an extra chunk added to their repayments each month, £44 on a 25-year £150,000 mortgage.

This is bad news for everyone though, as the bank’s fixed rate mortgages will undoubtedly increase proportionally, meaning that anybody looking to get a mortgage in the future will have to sign up on the higher rates. It also increases the chances of other banks following suit and raising their own interest rates.
What’s particularly interesting is that Santander has had to alter the rules which govern how it sets its interest rates. Previously, the bank could not increase them too far above the Bank of England’s central rate, a policy that has now been struck off and allows them to charge more for their mortgages.

With moves like this seemingly becoming more common, it’s a good time for borrowers to try and sign up to a new fixed rate mortgage, before they all climb.