C&G pushes up rates for new customers

Published 28th May 2010

Cheltenham & Gloucester increases standard variable rate for new customers from 2.5 per cent to 3.99 per cent

Cheltenham & Gloucester (C&G), part of the Lloyds Banking Group, has hiked its standard variable rate (SVR) for new mortgage customers, potentially raising the cost of monthly repayments on a typical loan by £185 a month.

From June 1, the SVR for new C&G customers will increase to 3.99 per cent and will not be pegged to the base rate, allowing the lender to adjust the rate at any time. Borrowers move onto an SVR after their initial deal expires.

Existing customers will continue to revert onto an SVR of 2.5 per cent because the small print in their mortgage contracts states that the rate has to remain at least 2 percentage points above the base rate.

Stephen Noakes, commercial director of mortgages, Lloyds Banking Group, said; “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 introduced this new rate for new mortgages only.”

The introduction of a higher rate for new customers follows a similar move by Nationwide Building Society, which introduced a new SVR of 3.99 per cent for new borrowers last year. The mutual said that its previous terms, which allowed millions of customers revert onto a rate of 2.5 per cent, cost it more than £450 million in 2009.

David Hollingworth, of London & Country Mortgages, the broker, says: “This move will be a blow for new customers but it only shows the continued pressure on funding costs facing mortgage lenders. The annual results released by Nationwide yesterday show the cost of maintaining such a low rate for so many customers.”

Michelle Slade, spokesperson for Moneyfacts.co.uk, the financial website, said: “When Lloyds TSB made the decision to guarantee its SVR it never expected Bank base rate to go so low. Now many of its borrowers are opting to stay put and overpay their mortgage rather than remortgage to a new deal at a higher rate.”

Source: ' Times '

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