Standard Life raises loan rate

In a surprise move this week, Standard Life Bank announced that its standard variable mortgage rate would go up by 0.1% to 5.1% on February 15, affecting 70,000 customers.

The move came on the same day the Bank of England said it would hold the base rate at its record low of 4% for the 14th month running.

A spokesman for Standard Life Bank, which is owned by insurer Standard Life, said the increase was necessary because of rises in the cost of borrowing on the wholesale money markets.

He said: "Over the last year or so there has been upwards pressure on wholesale market rates."

However, Ray Boulger of mortgage brokers, Charcol disagrees. He said: "You can't justify doing it on the back of wholesale money costs. It's clearly about margins. "At the moment they (money market rates) are around the same or even slightly lower than they were a year ago.

"Nobody else has done this and I would be surprised to see others doing it." During the festive period, a number of banks, including Halifax and Woolwich, reduced some of their savings rates also citing the market as the reason, but Standard Life Bank is the first to use this to raise mortgage rates.

"We think we are still very competitive," the Standard Life Bank spokesman said. "The average standard variable rate is 5.33%, and ours is still very good at 5.1% after our modest 0.1% increase."

As far as Bank of England base rates go, Mr Boulger said there is very little chance of a rise "for some time" and that if anything, a cut in the next few months is looking more likely, "following some bearish economic figures over the last month and further evidence of a slowdown in consumer spending and the property market."

Mr Boulger added that borrowers should be aware that because rates are likely to remain low, there is very little difference currently between what tracker and fixed deals have to offer.