Building Societies Raise Their Standard Variable Rates

In recent weeks there has been a lot of press coverage regarding building societies raising their Standard Variable Rates (SVR). This is the rate of interest that they charge their mortgage borrowers when they come off any deal that they may have had, it is also sometimes referred to as the "Revert to Rate".

A total of 12 building societies have either raised their SVR or announced that they will be increasing it in the last two weeks. They include, Skipton Building Society, Kent Relience Building Society, Norwich & Peterborough Building Society, Mansfield Building Society, Marsden Building Society and the Cambridge Building Society. This is by no means the full list and it is expected that those who haven't announced it yet will so soon.

The reason they have all had to make this decision is that they are no longer making money from savers. Only last month the Building Society Association released figures to show that in 2009, £7.6billion less was deposited with building societies.

Historically building societies have used the funds they attract from savers to fund their mortgage lending but because the Bank of England Base Rate is so low the savings rates that they are offering are not attracting savers.

This leaves homeowners that currently have a mortgage with a building society that is on the institutions SVR in a tricky situation. If they do not have enough equity in their property it is unlikely that they will be able to access the best mortgages as the mortgage best buy tables at present show that institutions are looking for customers with between a 30 and 40% deposit.

In the last 18 months lenders SVR's have looked like a relatively attractive proposition as many lenders have been unwilling to lend and the number of available mortgages in the market has remained quite low. However there has been an increasing number of mortgage products coming onto the market in the last two or three months. A sure sign that financial institutions are more willing to lend.

The only thing that remains to be improved is the loan to value ratios (LTV) that banks and buliding societies are willing to lend at. Newcastle Building Society released a range of products at the end of last year that not only had a high LTV of 80% but the rates meant they were featured in many mortgage best buy tables.

In this weeks mortgage best buy tables, the Leek Building Society is offering a Discounted Variable Rate Mortgage with an LTV of 85% and an incredibly low fee. Leek Building Society are only a small society and they will not be able to offer this product for long but hopefully it is an indication that institutions are beginning to be more realistic with the LTV's on their mortgages.

So if you have a lot of equity in your property and you are sitting on a building society's SVR it may well be time to move. If you have less equity but are in the same situation you can find deals if you look but hopefully in the coming months more appropriate mortgage products will become more widely available in the mortgage best buy tables.