Lloyds Banking Group has hiked the standard variable rate for new Lloyds TSB and Cheltenham & Gloucester borrowers and is no longer offering new customers the guarantee that its reversionary rate will never be more than 2 per cent above base rate.
The rate will increase to 3.99 per cent from June 1 and applies to new borrowers. It will be known as the homeowner variable rate to avoid confusion with the SVR for existing borrowers, which will remain capped at 2 per cent over base rate – currently 2.5 per cent. With the new rate, Lloyds also has the ability to vary the rate at which the SVR tracks base rate movements.
Last week, Nationwide rev-ealed that its decision to stick with its pledge to existing borrowers to cap its SVR had cost the building society more than £450m over the past year.
Lloyds Banking Group commercial director of mortgages Stephen Noakes says: “The new rate balances the needs of our customers with the commercial needs of the business.
“In the light of market conditions, particularly ongoing higher funding costs, we have int-roduced this rate for new mortgages only.”
Simplicity Financial Services principal Rob Downham says: “I do not blame them. What amazes me is that all these lenders had caps in the first place and that none of them foresaw the base rate could drop so low.”