Lloyds forced to raise SVR mortgage rate

The standard variable rate SVR structure at Lloyds TSB and Cheltenham & Gloucester mortgages has changed, with the lenders' 2.5 per cent deal for new borrowers scrapped.

New customers are now to receive an interest rate of 3.99 per cent when taking out a mortgage, although existing customers will remain on the previous 2.5 per cent rate.

Despite the increase, the banks say the new homeowner variable rate is one of the cheapest available from a top ten lender in the UK.

Commenting on the announcement, Paula John, editor at Your Mortgage, said lenders are under "commercial pressures", and in this case, have been forced to backtrack on an initial low-cost deals.

"Nobody ever assumed when these guarantees were made that the Bank base rate would hit 0.5 per cent and there would be a lot of pressure on mortgage lenders' funding prices," she said.

Ms John added that the new 3.99 per cent rate is "about market average" so lenders are unlikely to see many customers "desert the ship overnight".

"If it does annoy people sufficiently then they can vote with their feet and they can switch lender," she added.

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2010-06-02 10:06:54 © Moneyextra.com