Lenders look to up mortgage rates

Standard Life is to increase its mortgages rates, in a move that is expected to herald widespread rises, despite the Bank of England signalling a cut in interest rates next year.

From today Standard Life's standard variable rate (SVR) is will increase by 0.15 per cent to 7.46 per cent.

The rise is being put down to the global credit squeeze – as lending between banks tightens.

"It is very rare to see a lender increase its standard variable rate outside a base rate change. It could very well be the first sign that the mainstream 'prime' mortgage is feeling the pinch of the credit crisis," said Julia Harris mortgage expert at Moneyfacts.co.uk.

The move will not affect borrowers on fixed rate deals with Standard Life – although those who have had fees included as a part of a mortgage will find the higher SVR rate will be charged there.

Those on SVR mortgages are now being urged to consider remortgaging options.

"For those already paying the SVR, this shock move should be the straw that finally breaks the camel's back and encourages them to find a better deal or, at the very least make, sure the SVR is still the best option for them," said Ms Harris.

"This is a stark warning for anyone on an SVR rate or, indeed anyone with a rate linked to the SVR, as with many discounted rates. SVR is a managed rate, controlled by the lender, and it can and does move when base rate is stable."

Louise Cuming, head of mortgages at moneysupermarket.com, said: "Standard Life is the first lender to put their head above the parapet and acknowledge the need for action to protect their profitability in the current environment.

"This is a brave move, the reaction to which will be closely monitored by the bigger mortgage players."

She added: "Standard Life is pushing the boundaries and traditionally, once one lender is brave enough to venture into potentially unpopular waters, others follow.

"This move is reminiscent of fee increases – the first time fees moved into four figures, there was a huge outcry, but fees of even five figures are now commonplace."