Analysis: Bad news for some, but it’s been on the cards for a while

IT IS impossible not to have sympathy for people who have tailored their finances around a low Standard Variable Rate (SVR), particularly while the cost of living has been increasing across the board.

There will always be a shock to a certain extent, and negative publicity, when a lender increases their SVR. It is only natural, given the length of time SVRs have been at record lows. But borrowers will have been aware these rates would start to creep up eventually.

I think these SVR increases have been imminent since the Libor rate [the rate at which banks lend to each other] started to rise. Many borrowers have been on low SVRs for a long time, so lenders were always going to raise them when an opportunity arose.

Halifax has attracted the most negative publicity over this issue. However, there are other lenders who have raised their SVRs too. These rate rises have a disproportionately negative effect on anyone who cannot remortgage at the moment and who feel stuck on the SVR.

However, Halifax, for example, is offering some very attractive fixed rates for people currently on the SVR, even for those whose borrowing is at a higher loan-to-value level.

It is worth noting, too, that the new rates will not be at a level that will be completely alien to most borrowers.

Interest rates are at a historically low level and most will have experienced higher rates in the past. Borrowers also have to be aware the SVR, if it isn’t linked to the Bank of England base rate, can be increased at the lender’s discretion at any time.

• Robin Purdie is director of Mov8 Financial in Edinburgh.