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The average standard variable rate paid by UK mortgage borrowers reached its highest level in 13 years this month, it was revealed on Monday, and last week’s increase in the Bank of England base rate is to push it up further.
The financial firm Moneyfacts said the average SVR had gone up to 4.91% at the start June, and was up by 0.51 percentage points on December 2021. It is now at its highest level since February 2009.
SVRs are typically paid by borrowers who have come to the end of a fixed or discount-rate deal and are set at the discretion of lenders.
Figures from the trade body UK Finance show at the end of 2021 just over 1 million borrowers were paying their lenders’ SVR and that the average outstanding mortgage for these customers was £76,499.
Each 0.25 percentage point increase in rates will add about £16 a month to their repayments.
The Bank of England has increased the base rate five times since December, taking it from a historic low of 0.1% to 1.25%.
Some lenders have passed on every increase so far, but others have opted not to.
After the most recent increase, last Thursday, Santander announced it would increase its SVR from the beginning of August. Skipton and Leeds building societies said they would not be increasing theirs.
Many of Santander’s customers are on a different rate – its follow-on rate (FoR) which is explicitly linked to the base rate and will rise by 0.25% at the start of July.
Moneyfacts’ figures were calculated before last week’s widely predicted rise.
Other mortgage rates have also increased in recent months as the cost of funding deals has risen.
Moneyfacts said the average cost of a two-year fixed-rate mortgage had risen for eight consecutive months and, at 3.25%, had reached its highest level since November 2014.
Five-year fixed-rate mortgages have also been increasing in cost, with the average rate at 3.37%.
Eleanor Williams, finance expert at Moneyfacts, said: “It’s only the 90% and 95% LTV tiers (so often favoured by first-time buyers) where the average two- and five-year fixed rates remain lower now than they were this time last year, which may give hope to those looking to take a step on to the property ladder.
“While many consumers are battling the ongoing cost of living crisis though, it remains to be seen how any further changes in the market will impact prospective mortgage borrowers.”