Monday, 2 April 2012

Co-op blames canny savers for mortgage hike

Savers looking for high-paying fixed rate deals are pushing up the cost of mortgages.

That's what the Co-operative Bank says after announcing a half per cent jump in its Standard Variable Rate (SVR) for 54,000 mortgage borrowers.

The Co-op isn't the first to push up SVR. Halifax and Bank of Ireland set this ball rolling a few weeks ago.

Several have blamed the rising cost of raising money from savers and international lenders to fund their mortgages.

Now Co-op Bank says canny savers looking for high fixed rate accounts are driving the increase.

A spokesman said its mortgages are "predominantly funded through our retail savings".

And that they "are increasingly seeing a trend for savers to opt for longer term, fixed rate savings products, which typically pay higher rates of interest".

The "knock-on effect" is that mortgage interest rates have to go up.

The Co-op's variable interest rate on its Cash ISA is just 0.5%. In contrast, it offers a 2.49% fixed interest rate for one year deposits and 3.29% for 3 years.

The SVR for mortgage borrowers is being raised from 4.24% to to 4.74%.

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