Mortgage customers face £300 million additional mortgage bill

On the day when over a million people will be hit by the Standard Variable Rate (SVR) and variable rate mortgage rise, Which? estimates consumers will face an additional £300 million in mortgage repayments over the next year.

New research from Which? reveals 70% of mortgage-holders are concerned about an increase in interest rates.  14% say they are already struggling with repayments. The greatest impact of these latest rises will be felt by ‘mortgage prisoners’ who are unable to move to another provider.

Three quarters of mortgage-holders told us that they would be affected if their repayments increased by £50 a month, with 41% saying they would need to cut back on regular spending, 20% would need to reducing savings and 11% would not have enough for essentials.

An increase of £100 a month would see 20% of mortgage-holders not having enough for daily essentials like food and 11% being unable to pay their mortgage. Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as “devastating” and “a disaster”. 

Which? chief executive, Peter Vicary-Smith said:

“Our advice to anyone struggling with their mortgage repayments is speak to your lender straight away.  It is encouraging that a third of people we spoke to had approached their lender but worryingly in one in five cases, they said their lenders offered no help at all. This is just not good enough and we want to see banks do more to help their customers who are struggling.

“These SVR rises are the consequence of the lack of competition in the market and the failure of the Government to take action to promote competition. This is why the new financial regulator, the FCA, needs to be a watchdog not a lapdog. It must stand up for consumers and stand up to the banks.”

Which? wants lenders and the Financial Services Authority to do more to protect consumers against unjustified interest rate rises and ensure that consumers are offered the ability to fix their payments at a reasonable level. Lenders must not be allowed to take advantage of borrowers who are unable to move lender.

Notes to Editor

1. Cooperative Bank, Halifax, Clydesdale and Yorkshire Bank increases in SVRs will take effect on1 May 2012. Bank of Ireland has announced an increase in its SVR which will take effect in two stages on 1st June and 1st September. RBS/Natwest increased its variable rates for its offset mortgage customers on 1st March and will be increasing variable rates for its One Account customers on 1st May.

2. Which? surveyed 3,345 mortgage-holders in March 2012

3. Which? wants lenders and the FSA to do more to protect consumers against unjustified interest rate rises and ensure that consumers are offered the ability to fix their payments at a reasonable level. Some banks require consumers to substantially increase the rate they pay if they want to fix their payments. For example, the lowest rate RBS offers to existing customers on their SVR of 4% with a Loan-to-Value of greater than 90% is a 2 year fix at 5.79% with a £799 fee.

4. £300 million (approx) based on estimation of increasing monthly costs using actual figures from lenders where possible.

5. Which? defines a ‘mortgage prisoner’ as those people trapped with their existing lender and unable to move to a better deal.

Table notes

1. The rate is a variable rate and increased with effect from 1^st March for RBS/Natwest offset products and with effect from 1^st May for One Account mortgage customers (Virgin One, Natwest One and Direct Line One).
2. The rate for the One account is a variable rate and depends on the ‘Facility to Value’ – the total amount offered in relation to the value of your property. These range from 3.90% for less than 50% FTV to 4.75% for over 95% FTV.

Press Release: Consumer, Mortgage, Personal Finance