A look at the good and bad guys when it's time to revert to your lender's standard rate.

Following yesterday's post on Standard Variable Rate (SVR) increases, we thought we'd round up the current highest and lowest revert-to rates we're aware of.

The range between the best and worst in the market is quite staggering — but then, these are (still) exceptional times. 

Best & Lowest Mortgage SVRs:

The following data is correct at time of publishing:

As you can see, some lenders followed the Bank Of England's movements and are still at 2% (a 'normal' kind of margin) above the base rate.  Their customers will be pleased to just sit tight at reversion time!

Worst & Highest Mortgage SVRs:

Meanwhile though, other lenders have acted as if nothing has happened in 12 months:

For an argument on why building societies are putting up SVRs, see yesterday's post. However, if you have one of these lenders' mortgages, you're not going to see the funny side of a standard variable rate nearly twelve times base rate.  Re-mortgage options might be a bit limited at the moment, but there's no harm in getting some advice!

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.

The Royal Bank of Scotland (RBS) has increased its mortgage margins by up to 0.7% in order to maximise its benefit from low wholesale funding costs.

The question is, should a taxpayer-owned bank be restricted from making more money off its existing customers, the majority of who are taxpayers paying now and in the future to support the bank that almost failed?

Public ownership controversies aside, RBS isn't the only lender to raise margins while the base rate seems to be staying at rock bottom for the long run.

Nationwide, for example, has also raised its rates by a similar amount.  It's possible that both lenders are doing this to dissuade a surplus of applications on certain products.

Of course, it's nothing new that mortgage lenders take advantage of falling base rates to boost their own margins. Michelle Slade, of Moneyfacts.co.uk, noted that "lenders remain slow to act on the falling cost of funding. [They] are quick to pass additional costs on when [base rates] are rising, but are less keen to put rates back down again when the cost of funding declines."

RBS attracts a different kind of criticism because of its high-profile rescue with public money. Do you think this criticism is justified?

. . . and Lloyds, Barclays and Abbey aren't far behind.

As promised in Spring, the Financial Ombudsman Service (FOS) has just released its "name and shame" list of banks and financial institutions based on how well they resolve customer complaints.

The list tallies only the cases referred to the Financial Ombudsman Service, not total complaints to an institution.  FOS referrals are situations where a customer wasn't happy with the response to their complaint, and there's a wide variance in the numbers of complaints that the FOS upheld on the customer's behalf.  For this reason, the list makes interesting reading for mortgage lenders and borrowers alike.

We'll focus on: 

1. figures for mortgage complaints only—not banking, pensions or insurance;
2. percentages of cases upheld by the FOS, not the overall number of cases (since this depends on the size of the institution, amongs other things).

First thing to note: the industry average for mortgage-related cases is 41 per cent resolved in favour of the customer.  That means that in nearly six out of ten customer complaints, the FOS thought the lender was in the right.  That's not bad for the industry as a whole, compared to the percentages for banking and credit (61%) and insurance (70%). For figures like these, remember lowest means best.

So, who scored worse than average?

GMAC-RFC scored badly on the mortgages list: 75 per cent of complaints to the Ombudsman were upheld.  This typically means that in 3 out of 4 cases the Ombudsman judged that they had either sold the borrower the wrong product, charged them unfairly or done something else that left their customer out of pocket. In each of these cases, restoration means putting the customer back to the position they were in beforehand—for example, repaying charges or interest and moving them to the deal they should have qualified for in the first place.

That 75% figure puts GMAC out in front by quite a long way.  Any comments would be welcome as to why you think this is :)

GE Money (61%) and Preferred Mortgages (58%) came in second and fourth on the list, but they're mingling with three High Street lenders who won't be at all pleased to appear in such company: Lloyds (58%), Barclays (55%) and Abbey (52%).

The only High Street lender to look good out of all of this is Nationwide, whose figure of 28% is lowest on the chart.  However: there are many other lenders who don't chart at all because they had fewer than 30 complaints in the six-month period.  This includes most of the building societies (Skipton, Yorkshire, West Bromwich among them) and some even more surprising omissions: for example, Halifax isn't on the list at all.  Surely some people must have complained about the UK's biggest mortgage lender?

Let us know what you think — especially if you're as unsurprised as we are to see GMAC up there!