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Harsh reality

No sooner had the ink dried on last week’s announcement from Halifax that it is increasing the cap for some borrowers on its standard variable rate from 3 per cent above base rate to 3.75 per cent above base than it trumped that by increasing its SVR to 3.99 per cent.

With about 850,000 customers having at least some of their mortgage balance on the Halifax SVR and an average balance of these customers at £67,500, this means an increase of around £16.40 a month or about £40.80 a month per £100,000 on an interest-only basis.

This is a move that will no doubt stoke the fires of the anti-Lloyds, anti-banking, anti-business and anti-anything lobby but, as ever, there are two sides to the story, especially as a broker.

The biggest issue is, of course, that for many in the current environment, even a small rise in their monthly outgoings hurts in a disproportionate manner than it may have done in more “normal” times. There are many who are only able to keep the wolf from the door because rates are low and a move such as this could lead to an increase in problems and arrears.

However, this is a harsh reality of life today and it should be remembered that at the heart of the matter, lenders are like any other business and need to sometimes make tough decisions to stay viable.

On the face of it, rates should be getting cheaper. After all, since the start of the year, Libor has fallen, as has one, two, three and five-year Swap rates, yet we are still seeing lenders on the whole increasing their rates. There are clearly other forces at work.

The real cost of funds is still a complex affair for most lenders, with increasing regulation, tougher securitisation, an increasing cost of attracting savers and the thorny issue of capital adequacy.

It should also be remembered that lending is just one side of the proverbial seesaw and while borrowers will be wailing at this move, many savers will be saying that this is about time and hopefully will be reflected in better savings rates.

Also, let’s face it, Halifax has just come into line with other lenders and 3.99 per cent is still among the competitive side compared with others. It should also be remembered that Halifax has not stopped lending, in fact, far from it.

It is still the go-to lender for many first-time buyers, it supports the new-build industry and Government initiatives and it has also bought out a cunning set of product transfers at reasonable rates to help.

In fact, it is easy to forget about Halifax’s product transfer range, which I am assured if it was a lender in its own accord would be comparable to BM Solutions for the amount of business it does. For many brokers, these are a lifeline as they pay procuration fees and the process is one many other lenders should look to emulate.

Also, with my broker sales hat on, you could argue that this will also help to give the remortgage market a kick and any increase in business is a welcome one, especially when it will be helping to protect customers from even further rate rises that may come in the future.

Andrew Montlake is director of Coreco

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