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EnergyEurozone crisis could raise your mortgage rates
Filed under: Mortgages
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Many of Britain's 11.2m mortgage holders should prepare for mortgage rate hikes soon. That's the warning from the Bank of England which claims eurozone stress means UK banks are struggling to find funding.That means more expensive borrowing as banks pass on the costs of new, more expensive money. A trend which started recently but may accelerate.
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Rising rates
A rash of lenders recently hiked their Standard Variable Loan rates (SVR), including the likes of the Co-op and Halifax. For example, last week the Yorkshire Building Society pushed its two-year fixed rate to 3.54% from 3.24%.The Bank of England claims rates on new tracker mortgages have climbed by half a percentage point in the eight months up to April, while the base rate has remained stubbornly at 0.5% - for more than three years now.
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However, some mortgage holders will be protected from any future rate hikes - provided they don't change from their current deals. Typically these are people who took out tracker or fixed-rate mortgage deals in the past from Cheltenham & Gloucester, Lloyds (owner of C&G) and Nationwide.
Winners - and losers
"Some of these people are not at risk of seeing their SVR rise," Ray Boulger from John Charcol mortgage brokers told AOL Money, "because these lenders stipulated in their mortgage contract that the SVR would not be 2% above Bank of England base rate, and the contract was sufficiently set in stone that they couldn't wriggle out of that."However people who had deals with these three lenders and have subsequently switched to new mortgage products won't be entitled to the original 2% above Bank of England base rate promise.
Typically new SVRs are now around the 3.99% mark, a rise of around 0.5% from a few weeks ago. For a £150,000 mortgage, that's a rise of close to £500 a year, or around £40 a month extra to find.
Longer term, Boulger thinks that the current 0.5% Bank of England base rate is likely to be with us for at least two more years because of the continued eurozone anxiety. "I wouldn't be surprised if it was there in three years time."
10 things we hate about our banks
- 1. PPI<p> More than 46,000 of 106,000 the complaints received by the FOS in the second half of last year related to payment protection insurance (PPI). And the organisation is expecting to receive a record 165,000 PPI complaints in 2012/2013.</p> <p> The huge numbers are due to the PPI mis-selling scandal that should now be a thing of the past, but there is no doubt that the insurance, which can add thousands to the cost of a loan, is highly unpopular!</p> <div> </div> <div> (Pictured: Martin Lewis after the PPI payout ruling)</div>
- 2. Mortgages<p> Complaints about mortgages jumped by 38% in the last six months of last year, the FOS figures show, compared to an increase of just 5% in investment-related complaints.</p> <p> Common gripes about mortgages include the exit penalties imposed should you want to sell up or change you mortgage before a fixed or discounted deal comes to an end, and the high arrangement fees charged by many lenders.</p> <div> </div>
- 3. Savings rates<p> While there is nothing in the data released by the FOS about the number of complaints relating to savings accounts, hard-pressed savers have been struggling with low interest rates for several years now.</p> <p> You can get up to 3.10% with Santander's easy-access eSaver account, but many older accounts are paying 1.00% or less and even this market-leading offer includes a 12-month bonus of 2.60% - meaning that the rate will plummet to just 0.50% after the first year.</p>
- 4. Borrowing rates<p> Banks are imposing the highest authorised overdraft interest rates since records began, with today's borrowers paying an average of 19.47%, according to the Bank of England.</p> <p> A typical Briton with an overdraft of £1,000 is therefore forking out around £200 in interest charges alone. Coupled with meagre returns on savings, it's enough to make your blood boil!</p>
- 5. Penalty charges<p style="text-align: left;"> While authorised overdrafts may seem expensive, going into the red without permission will cost you even more due to huge penalty fees.</p> <p style="text-align: left;"> Barclays, for example, charges £8 (up to a maximum of £40 a day) each time that there is not enough money in your account to cover a payment.</p>
- 6. International transfer charges<p> If you need to send money abroad, the likelihood is that your bank will impose transfer charges - and offer you a poor rate of exchange. Someone transferring a five-figure sum could easily lose out by £500 or more as a result.</p> <p> The good news, however, is that you can often get a better deal by using a currency specialist such as Moneycorp.</p>
- 7. Waiting on the phone<p> <span style="text-align: left; ">Automated telephone banking systems, not to mention call centres in far-flung parts of the world, are one of our top gripes - especially as we often encounter them when we are already calling to report a problem.</span></p> <p> In the words of one disgruntled customer: "What is it about telephone banking that turns me into Victor Meldrew? Well, maybe it's the fourteen security questions, maybe it's the range of products that they try to push or maybe it's because I'm forced to listen to jazz funk at full volume while my phone bill soars.</p> <div> </div> <div> "Actually though, I think it's because the people I eventually speak to rarely seem able to solve the issue I'm calling about."</div>
- 8. Being treated like a number<p> The days of a personal relationship with your bank manager are long gone - for the huge majority of us at least.</p> <p> When ethical Triodos Bank investigated recently why around 9 million Britons would not recommend their banks to a friend or relative, it found that almost a third felt they were not treated as individuals. Another 40%, meanwhile, were simply disappointed with the customer service they received.</p> <div> </div>
- 9. Long queues in branches<p> <span style="text-align: left; ">When you're in a rush, the last thing you want to do is wait in a long queue at your local branch.</span></p> <p> Researchers at consumer champion Which? recently found that most people get seen within 12 minutes, but you could have a much longer wait if you go in at a busy time. Frustrating stuff!</p> <div> </div>
- 10. Bankers' bonuses<p> The Triodos Bank research also indicated that the bonus culture that ensured the bank's high-flying employees received large salaries, even when it was making a loss at the taxpayer's expense, was hugely unpopular with consumers.</p> <p> About a quarter of those who would not recommend their current banks said this was the main reason why. And with RBS executives sharing a £785 million bonus pool despite the bank, which is 82% publicly owned, making a loss of £2 billion last year, it's not hard to see why.</p>
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