Lenders accused on interest rate hikes

Homeowners are feeling the pinch after some of the biggest mortgage lenders raised their interest rates by more than the Bank of England's latest increase.

Several leading banks and building societies have gone beyond the recent quarter-point rise in the base rate to boost profits.

They include three brands that are part of the Halifax group, Britain's biggest mortgage lender.

Bank of Scotland, Intelligent Finance and The Mortgage Business have put up the standard variable rate on home loans by 0.35 of a point.

The tactic will add millions of pounds to the annual income of the Halifax - Bank of Scotland group, which saw a 31 per cent leap in profits last year to £5.7billion.

Standard Life and Nottingham Building Society have also increased their standard-rate home loans by 0.3 per cent.

Lenders have boosted their profit margin by scaling back the gains they offer savers. Most

have put up the interest rate paid on savings by 0.25 per cent.

Eddy Weatherill, of the Independent Banking Advisory Service, said: "This is nothing short of a scam. The banks are simply lining their pockets at the expense of struggling customers.

"It is unfair and a disgrace, but there is no regulatory system in place to put a stop to it."

Andrew Hagger, spokesman for independent financial analysts Moneyfacts, agreed. "I can't see any reason to increase the mortgage rate by more than the base rate other than to increase profitability," he said.

"People whose mortgage payments are tied to the standard variable rate of their lender will have expected the rate to move in line with the Bank of England base rate.

"There may well be something in the small print which allows for a rise above any base rate change, but that is not very transparent for customers."

Consumer group Which? advised buyers with standard variable rate mortgages to look at switching. A spokesman said even those who have to pay a penalty fee might save money.

The Bank of Scotland said a small percentage of its customers were on standard variable rate but it refused to put a figure on this. It said the majority could switch to one of its other loans without incurring an early redemption charge. But even without this charge, other fees are likely to apply.

Standard Life claimed its decision to go for a higher rate rise was partly because it expects the Bank of England to raise rates again. It said its variable rate is competitive compared with rivals.

Intelligent Finance took a similar line, saying the decision was the result of "re-examining its pricing model".

The company said its standard variable rate of 7 per cent remained attractive compared with other lenders.