‘Profiteering’ Santander raises mortgage rate for 300,000
Borrowers face further rate rises as Santander blames the increased cost of banking
BRITAIN’S second biggest mortgage lender, Santander, has been accused of profiteering after announcing a big hike in its basic rate, affecting hundreds of thousands of households, despite the fact that the Bank of England base rate hasn’t changed in more than three years.
The Spanish-based bank, which swallowed up Abbey National in 2004 and has 1,400 branches across the UK, has told customers on its standard variable rate mortgage (SVR) that from 3 October the rate will rise from 4.24 per cent to 4.74 per cent.
This means a borrower with a £150,000, 25-year repayment mortgage will be forced to pay an extra £44 a month - or £528 a year.
The bank blamed the decision on the rising expense of banking, saying: "The cost of running a bank in the UK has increased dramatically, through a combination of increased liquidity, capital and funding requirements." Experts warn other banks are likely to follow suit.
Mark Harris, chief executive of mortgage broker SPF Private Clients, told The Independent: "This move is profiteering, pure and simple. Interest rates may have been held at 0.5 per cent for three and a half years but lenders such as Santander are raising their SVRs regardless."
Campbell Robb, of Shelter, the housing charity, warned: “Even a small rise in interest rates could leave many more homeowners struggling to pay the bills, and put them on a downward spiral of mortgage debt and ultimately repossession.”
The Independent estimates the Santander rate rise will affect up to 300,000 households. And the bank has revealed the rate could jump even higher. It will be relaxing its cap on how high SVR can go above the Bank of England base rate, giving the bank the potential to raise it as high as 5.49 per cent.
Lord Oakeshott, the former Liberal Democrat Treasury spokesman, told The Times: “The real problem in the economy is a chronic lack of demand and anything which cuts spending power is the last thing we need.”