Can you believe that some lenders are increasing their Standard Variable Rates at a time of static low bank rates?

Despite the Bank of England Base Rate (BoEBR) staying put at an all-time low of 0.5%, some lenders have increased their standard mortgage interest rates by as much as 1.49%.

Nationwide's change is the most remarkable, introducing a new 3.99% SVR for mortgages completed after 30th April 2009. Previously completed mortgages are still eligible for the bank's former SVR of 2.5%.  That's a big difference.

Accord Mortgages has increased its SVR by 0.65% to join a host of other lenders on 5.99%. The other lenders making recent increases have all been building societies: Cambridge BS (up by 0.59%), Ipswich BS (0.5%), Marsden BS (0.46%), Mansfield BS (0.35%), Scottish BS (0.25%) and Skipton Building Society (a bit more complicated).

How do you explain a move like this?

Increasing SVRs now, despite static base rates, could be a sign of lenders' frustration: a deliberate attempt to unsettle existing mortgage borrowers and prod them towards new deals.

The problem for lenders is inertia. 2009's drastic base rate cuts have resulted in lower SVRs, which in turn mean people don't want to re-mortgage. Existing borrowers find that when they come to the end of promotional interest rates (fixed, discount variable and so forth), the Standard Variable Rate they revert to is low enough for comfort. For mortgage holders with low equity, there's little incentive to apply for new deals as the likelihood of getting a better rate elsewhere may be non-existent.

Why does this inertia trouble lenders? After all, isn't their first priority to keep a customer base that steadily repays its loans and doesn't default on its debts?

The answer is surely the reliance of many lenders on mortgage fee income — they depend on people changing deals in order to charge profitable £999 arrangement fees per remortgage.

Another possible, less sinsister reason for the increases is to allow these building societies to attract funds from savers by raising their savings rates.  It's a competitive savings market, and shoring up the deposit base seems to be what matters.

Does this affect you if you're not with one of the societies mentioned? Not yet, although the concern is that this will now spark an across-the-board series of SVR rises. Borrowers whose monthly mortgage repayment amounts have been mercifully subdued by, for example, Lloyds TSB's 2.5% Standard Variable Rate, might find the big banks are tempted to follow suit, leading to higher monthly repayments for a lot more mortgage customers.

There aren't many lenders still operating in the 100 per cent mortgage marketplace, but the club will soon welcome a new member.

Bucking the trend of lenders shrinking away from high loan-to-value deals, Mansfield Building Society is re-entering the 100 per cent club with a first-time buyer mortgage offer.

However, it's not a 'traditional' 100% deal, as buyers will only be borrowing a share of the purchase price. 

See, this deal is a shared ownership mortgage. It's available to applicants buying a share of a housing association property. Borrowers will buy 60% of their property on a 5.99% fixed rate mortgage over five years, and pay rent on the remaining portion of the property. There's an option to purchase further share in the property over time.

The point of this kind of deal is to lower the first step onto the housing ladder for those whose borrowing power is insufficient to buy a suitable home outright. A note of caution, though: shared ownership mortgages should in our opinion be entered into carefully. We've heard of buyers having difficulty extending their share with certain mortgages, effectively having to exit their existing deal and re-apply.

Good points with this deal? Most importantly, there are no fees.  There's also an effective 5-year guarantee against negative equity: the housing association will cover any market losses if the home is sold within that time.

Conclusion? It's not quite the same as a 100 per cent mortgage deal during pre-credit-crunch times, but it will undoubtedly help certain buyers (careful ones, we hope) to get onto the housing ladder during a relatively low time for house prices. For that, Mansfield Building Society: bravo.