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Santander has announced an increase of 0.5% in its standard variable rate (SVR) to 4.74% which will take effect from 03 October 2012. It is hailed as a blow to home owners and follows a raft of other lenders who have also hiked their SVR rates this year. In the last few months the Halifax, Co-operative Bank, Bank of Ireland and Yorkshire and Clydesdale Bank have increased their SVR rates. ‘Many people are already seeing their finances and household budgets stretched, and with winter approaching some Santander mortgage customers may feel left out in the cold,’ said Michael Ossei, personal finance expert at uSwitch.com. ‘The lowest SVR on the market is 3.69%, so Santander is someway off the top of the table, but with the highest rate of 5.99% it's by no means offering the worst deal to mortgage customers. But considering that the base rate is just 0.5% still, the majority of home owners may feel they are being unfairly treated by their mortgage provider,’ he explained. 

‘This latest increase should serve as a warning that mortgage payments could go up at any time and with very little notice. If you are enjoying lower mortgage payments at the moment it may be worth overpaying, or putting aside the extra cash you're saving while rates are so low. And although it may be another year or more before the base rate rises, the only way for mortgage rates to go in the long term is up,’ he pointed out. ‘Although fixed deals tend to come with a higher rate, borrowers looking for peace of mind could protect themselves against rises by moving to a fixed plan such from Post Office's five year fixed deal at 3.59% with no fees. Natwest's five year fixed deal has a competitive rate of 2.99%, but comes with a huge fee of £2,495. ‘Unfortunately the best fixed plan on the market has recently been pulled, so consumers should act quickly or risk losing out. However, any home owners worried about their mortgage payments should make sure they do their homework to make sure they get the best deal possible to suit their needs,’ he added. 

Clare Francis, mortgage expert at MoneySupermarket.com, said that it is a blow the Bank of England base rate has remained unchanged since March 2009 yet SVRs have been edging upwards. ‘A Santander customer on its SVR rate with a £150,000 25 year repayment mortgage will see their payments increase by £42.54 a month, a significant amount for the many households who will be impacted by this,’ said Francis. ‘Anyone affected by this or who is concerned their mortgage lender may join the SVR hiking pack should consider remortgaging onto another deal if possible. If you are happy to stick with a variable rate then go for a tracker rather than a discount as trackers move in line with the Bank of England base rate. Speak to an independent mortgage broker if you are unsure of the best option as they will explain what is available to you and help to make the best decision for your situation,’ she explained. Meanwhile, mortgage holders who want the security of knowing the size of their monthly repayments can benefit from rate cuts by Chelsea Building Society. Rates on all 70% LTV and 85% LTV two, three and five year fixed rate products are being reduced by up to 0.25%. Headline products offered by the Chelsea include a two year fixed rate 70% LTV mortgage at 3.19% with fees of £1,695 and a two year fixed rate 70% LTV at 3.29% with £895 fees and free valuation and legal assistance. ‘There is still uncertainty over how the base rate will move in the coming months and years so some borrowers prefer to fix their mortgage and avoid any surprises. The cuts we are making will help to keep borrowers' repayments as low as possible and either help them on to the housing ladder or make owning their property more affordable,’ said Chelsea Building Society product manager Jemma Smith. ‘There has been a great deal of movement within the mortgage market recently as a result of falling swap rates and we are making sure customers benefit by keeping our wide range of mortgages as competitive as possible. As well as competitive rates and our great customer service, many of our products also include incentives like cashback on completion or free legal assistance which can be a great help to borrowers,’ she added. Offset variants of all mortgages are also available. All 70% and 85% LTV mortgages can be arranged in Chelsea branches, via its website or through its telephony service.