What goes down must come up – Standard Variable Rates head north

Halifax, RBS One Account customers and now Bank of Ireland customers have all been told in recent days that their Standard Variable Rates are going up. Why?

It is the cost of funding we are told. Well, given that the interbank lending rate is a little higher but stable at just over 1% and the European Central Bank just emptied nearly a trillion Euros into the bank pockets at 0.5% there must be more to than that.

We are also in ISA season and what that means is great offers to hoover up all the spare cash this tax year and make an early attempt to catch some of next years. That means higher rates for proof just watch the TV ads. Last same week Santander raised new loan rates on mortgages and at the same time it topped the Isa best buy tables. You decide if it was happenstance.

So savers are at last getting a better deal, a relief because now several million pensioners will again be able to afford jam for their scones. But seriously what this means is a reality check for interest rates, rates have been artificially low for 3 years and now the old fashioned 2-3-4 bank manager’s route for business is back in full flow (borrow from savers at 2 – lend to homeowners at 3 – be on the golf course at 4).

What to do? Well review of course, but this is where I hope all that EU money comes in because at the back end of last year all lenders said for them borrowing would be harder this year (which in turn means lending) and a sure sign of that is the ISA/Mortgage tie up being seen, but the extra EU money could loosen the purse strings.

I sincerely hope so because after a very busy Jan and decent Feb we are seeing lenders again not want to be top of the sourcing tree, pulling products pronto and generally wanting to look like they are at the mortgage prom, but not actually dancing.

So all in all rates have gone up, which we knew would happen but has not been driven by the base rate, further indication that the base rate is now just one of several levers rather than the stand out driver of borrowing costs.

If you are tied to a tracker or with a lender that has tied itself to a tracker standard rate, then you have choosen/fallen into it very well but need to watch your lender closely in case they can cancel this – see Skipton BS in early 2010. Otherwise check NOW what rate you are on and what you can get. Also check what your Lenders Standard Variable Rates will be, if you are with Yorkshire, Leeds or Chelsea Building Societies you could be in for a shock

And that applies to everyone, even those on a tie in – forewarned is forearmed.

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