Halifax raises SVR mortgage cap

Around 40,000 borrowers are facing the threat of higher mortgage costs after Halifax raised its SVR cap (PA)

Around 40,000 borrowers are facing the threat of higher mortgage costs after Halifax raised a cap for those on a standard variable rate (SVR).

The increase from 3.5% to 4.25% comes into force in April and provides the lender with flexibility to increase charges should it wish, although it insisted today there are no current plans to do so.

It is the first time that the Halifax has increased the SVR cap since October 2008.

Borrowers revert to paying SVR rates when fixed deals come to an end, although many may struggle to switch providers as lenders are expected to tighten their criteria this year amid the weak economic conditions.

Customers affected by Halifax's decision will have taken out deals between 2001 and 2007.

A Halifax spokeswoman said letters have been sent out to customers to confirm the change in the cap.

It said: "We have written to all affected customers to explain that from 31 March 2012, we are amending the cap on the Halifax SVR from 3% above base rate (of 0.5%) to 3.75% above base rate.

"This change does not affect the amount customers pay, and the SVR remains at 3.5%.

"We continually assess the many dynamic factors that impact mortgage pricing, and have reviewed the current cap level to ensure that it remains suitable in the current market conditions."

A spokeswoman said funding costs have changed dramatically, with several different factors such as the eurozone crisis and the general economic climate affecting the situation.

PA