Santander protects customers against mortgage increase after Bank of England interest rate hike

Santander has become the first major bank to protect homeowners from mortgage rate hikes while raising rates for savers.

The Bank of England raised interest rates on Thursday, adding an average of £612 a year to mortgage payments as lenders raised their standard variable rates (SVRs).

But unlike its peers, Santander has announced it will keep its SVRs at 7.5 percent, rather than match the bank’s 0.25 percentage point increase.

Skipton Building Society has also taken a stance to keep its rates stable, announcing ahead of the base rate decision that it would not increase its SVR, but would pass the increase on to savers.

But HSBC and Barclays have already raised their rates in line with inflation, while construction funds Suffolk and Newbury raised rates by 0.5 percentage point earlier this week.

While Virgin Money raised its rates to a remarkably high 9.24 percent.

Dominik Lipnicki, broker at Your Mortgage Decisions, said, “Because many mortgage rate hikes have been prohibitively expensive, so any move to halt increases is a step in the right direction.”

Before the rate decision, the average SVR was 7.85 percent, meaning some homeowners will now face rates of more than 8.1 percent if their lender doesn’t decide to freeze or cut deals.

Banks and building societies made a push this week to raise savings rates after coming under scrutiny from Jeremy Hunt and City watchdog, the Financial Conduct Authority.

Nationwide and HSBC raised their rates on Thursday, while Santander announced a 0.25 percentage point increase.

Aldermore, Paragon and Yorkshire Building Society all improved rates on their deals by up to 0.4 percentage point.

The average fixed annual savings rate is now 5.23 percent, or 2.28 percent for easily accessible accounts, Moneyfacts Compare.

Cash Isas pay an average of 5.01 percent, with easily accessible Isas available at a rate of 2.88 percent.

Banks and building societies have pushed to raise savings rates this week after coming under scrutiny from Jeremy Hunt and City watchdog, the Financial Conduct Authority

Earlier this week, Chancellor Jeremy Hunt threatened that failure to pass on tariff increases could lead to regulatory action.

“It takes too long for interest rate hikes to be passed on to savers,” he said.

But despite these increases, some banks are still short-term savers, said Anna Bowes, of interest rate regulator Savings Champion.

“If base rates rise, that should mean interest rate increases on floating savings accounts, but some banks don’t pass on the full 0.25 percent and not all accounts will see an increase.”

Industry watchdog the Financial Conduct Authority has renewed its call to action, giving banks four weeks to offer depositors low interest rates or take disciplinary action.

Economists have warned that the Bank’s sharp streak of rate hikes is starting to hurt businesses, suggesting little more may be needed to rein in inflation.

Kitty Ussher, chief economist at the Institute of Directors, said interest rates “could spike lower than the market expects.”

Investors now expect at least two more 0.25 point hikes in the base rate, taking it to a 15-year high of 5.75 by the end of the year.

“The rate hikes have had some traction and are eroding confidence,” she said.

“Those exposed to variable debt or in affected sectors are starting to say it hurts.”

Inflation has remained stubbornly high at 7.9 percent. Rishi Sunak on Wednesday urged the UK to stick to its plan to curb inflation, even if it means higher mortgage payments for homeowners.