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Halifax announces increase to mortgage rate

[ Posted March 9th, 2012 ]

Halifax was the second of the major banking institutes over the past two weeks to announce that they will increase their mortgage rates for those that have a standard variable rate mortgage.  The new change will affect about 850,000 borrowers who will see their mortgage costs jump once the change takes place on 1st May.

The bank claims that they have had to increase their rates due to the higher costs of mortgage funding given the current economic environment. However, many mortgage owners are wary of the change affecting their monthly budgets and feel betrayed as the base rate is still quite low.

Customers will be hit hard by the increase in the mortgage rate as the average consumer will find themselves paying £17 to £500 more per month on a mortgage that has 15 years left on it.  On average, a homeowner with a £150,000 mortgage will find themselves paying £40 more per month; which adds up to an extra £480 per year. Homes where the budget is already tight on a month to month basis are the most likely to be affected, as spare money becomes even less of a common occurrence.

Those who may not be able to afford the rate increase will want to take a look into the remaining fixed mortgages options that are left on the market. While some of the fixed offerings may not be a much better choice than the SVRs, in the long term they may be the safer option given the fact that they will at least protect homeowners from future SVR increases.

There is no way to tell if this will be the only rate increase this year from Halifax and the other major banks, so action now may be the best way to protect one’s future interests. The Consumer Action Group is calling the increase in interest rates by Halifax shocking, as well as the other announced increase in SVRs by the RSB and Santander.

However, Halifax is at least responding to its customer’s concerns by offering fee-free transfers to its borrowers that want to change their deals. They are also offering customers that have a 60% LTV or higher the chance to switch to a fixed two year mortgage set at 3.49% with no fees attached. For some customers this may be the best option versus taking a chance on future SVR increases.

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