Halifax has become the second mortgage lender to increase its standard variable rate (SVR), following the announcement by the Royal Bank of Scotland that it was raising the rate on two of its mortgage products.
Up to 850,000 homeowners will be effected by the Halifax hike. On 1 May, the SVR increase from 3.5 per cent to 3.99 per cent will see a payment increase of £16.40 to almost £500 a month for customers with a £67,500 balance. Homeowners with a £100,000 mortgage will be charged an extra £300 a year.
Halifax, owned partly by the taxpayer as a subsidiary of the Lloyds Banking Group, said that the present difficulty for banks to raise money through wholesale markets and retail savings justified the mortgage hike. Along with RBS's rise of 0.25 per cent to 4 per cent for both its Offset Mortgage (starting 1 March) and One Account (1 May) products, it comes as the first increase in mortgages for three years.
Stephen Noakes, managing director of Halifax, said:
In light of market conditions, particularly on-going higher funding costs, it has been necessary for us to review the Halifax Standard Variable Rate. At 3.99 per cent, the rate more accurately reflects the cost of funding a mortgage, but it remains competitive for borrowers.
Chris Taylor, chief executive officer of the insurance company MarketGuard, called the announcements "a blow to the already squeezed middle who will inevitably find their finances shrinking further".