These are testing times for freelancers and contractors coming to the end of their discounted rate mortgage period. With a number of high street lenders raising their standard variable rates, they are feeling justifiably nervous about their repayments.
First the Halifax raised its interest rates and now the Co-operative Bank has made the decision to follow suit. Around 54,000 mortgage holders are likely to be affected by the increase, which will see the Co-op’s standard variable rate go up to 4.74% at the beginning of May. Average monthly repayments will increase by about £15.
The average borrower has an outstanding balance of £48,000 and another 11.5 years remaining on their mortgage. Their monthly repayments will go up to £455 from £440.
The Consumer Action Group has branded the increases as shocking, especially when you consider that the Bank of England has kept the base rate at a historically low 0.5% for more than three years.
A spokesperson for the Co-op acknowledged that people with a high LTV mortgage may be concerned about the increase and it will offer them an alternative option. They will be offered the opportunity to take out a five-year fixed rate home loan at their current interest rate.
The Co-op’s variable rate will still be less than that charged by the Clydesdale and Yorkshire group who are putting their rate up to 4.95% on May 1st.
RBS is increasing the rates on its One Account and Offset mortgage to 4% and Halifax customers will see their SVR increase to 3.99% at the beginning of next month. The Bank of Ireland is also increasing variable rates, but in its case the rise will be implemented in two stages.
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.