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Why it may be time to remortgage

Mortgage borrowers with building societies are getting a raw deal after two more mutuals raised their standard variable rates (SVR) last week, despite Bank rate remaining at 0.5% for 11 consecutive months.

Norwich & Peterborough raised its SVR — the rate customers are moved to when they come to the end of a mortgage deal — by 0.5 percentage points to 5.35%, while Surrey-based Holmesdale increased theirs by 0.35 points to 4.89%.

They followed Skipton building society’s announcement that it would increase its rate from 3.5% to 4.95% next month.

Mansfield, Marsden, Kent Reliance and Cambridge building societies have also increased rates recently. There have been 12 rate rises in the past two months alone, according to largemortgageloans.com, the broker.

The moves come as building societies face a growing cash crisis. Savers withdrew £7.6 billion more from building society accounts than they deposited in 2009, the Building Societies Association said last week. This is the largest amount in any year since records began in 1955, prompting mutuals, which rely on savings to fund mortgages, to increase SVRs.

Ian Gray, of Largemortgageloans, said: “Societies face a cash crisis but members should not have to bear the brunt of it.”

Thousands of people have remained on their lender’s SVR when they have come to the end of a fixed or tracker mortgage, as interest rates have stayed at record lows. SVRs are also attractive if you have only a small amount of equity in your home as lenders generally reserve their best new deals for borrowers with a deposit of at least 40%. However, research by Moneysupermarket, the comparison firm, found 85% of SVRs are now more expensive than the cheapest two-year fixed-rate mortgage deals.