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Rate rise forced by credit squeeze

There are signs that lenders are now feeling the effects of the global credit crunch and borrowers can expect higher mortgage rates as a result.

Although the Bank of England has left interest rates unchanged this month Standard Life has become the first lender to increase its mortgage rate.

Standard Life’s SVR (standard variable rate) will increase by 0.15 % points to 7.45% from Monday.

Any borrower whose mortgage is linked to the SVR will be affected.

This includes anyone with a tracker mortgage or a fixed rate mortgage whose deal period is due to end soon.

A tracker mortgage is linked to the Bank of England base rate and moves up or down with the base rate. It is not linked to the SVR until the tracker deal ends.

Anyone who added arrangement fees to their loan will find that their repayments increase as Standard Life charges interest on these fees at the SVR.

Experts predict that other lenders will follow.

Specialist Lenders or sub-prime lenders as they are sometimes called, who deal with borrowers with a poor credit history have already increased their standard rates.

The SVR is controlled by the lender and it can move even when the base rate is stable.

Problems in the US are making all lenders more cautious as the cost of funding for lenders is increasing month by month although it is thought that it has now reached a peak.

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