Mortgage News: More Lenders Up Cost Of Borrowing As Rate Pessimism Deepens


Lenders are significantly increasing the cost of mortgage borrowing, as was widely expected following last month’s inflation news, to the dismay of beleaguered borrowers, writes Jo Thornhill.

The headline rate of inflation fell from 10.1% to 8.7% from April to May but core inflation, with energy and food costs stripped out, rose from 6.2% to 6.8%, disappointing many analysts. Food inflation is running at 19.1%.

Virgin Money has announced an increase to its standard variable rate (SVR), the rate borrowers default to after their fixed rate deal ends unless they switch to a new fixed or tracker deal. It will increase to 8.74% from 8.24% and is now one of the highest SVRs on the market.

The lender’s buy-to-let SVR is increased to 8.94% from 8.44%. The variable rate changes are effectively immediately for new customers and from 1 July for existing customers.

Virgin, which has consistently offered among the most competitive fixed rate deals in recent months, also recently increased fixed rates across the board. It offers a five-year fixed rate at 4.61% (for borrowers with at least 35% equity in their property), but this deal was on offer at under 4% just last month.

Last month’s higher-than-expected inflation figures point to further interest rate rises for 2023. The next Bank of England interest rate decision is on 22 June. The market believes the Bank Rate could rise from 4.5% to 4.75% or even 5%, and that this may still not be the peak for this rate cycle.


Sandstone Group