On November 2, the Monetary Policy Committee voted seven to two to make the first base bank rate (BBR) rise in a decade – raising the rate to 0.5% from 0.25%.
However, despite the rate hike, the mutual has seen a 3% increase in the number of customers reserving a two year discounted standard variable rate (SVR) mortgage.
Throughout October, the society recorded a daily average of 4% of its mortgage customers choosing one of its discounted SVR mortgages, but this figure increased to a daily average of 6% during the first week of November.
The figures are announced as the Bank of Ireland’s Richard Rowntree said, at the UK Finance Annual Mortgage Conference, that up to 10% more applicants who would have qualified for mortgages will likely fail stress tests due to rising SVRS, following the BBR rise.
Mike Sims, senior mortgage manager at Yorkshire Building Society, commented: “It’s interesting that some borrowers are still keen to secure a variable mortgage despite the first Bank Rate increase in a decade being announced.
“Borrowers clearly value the opportunity to keep monthly repayments down over certainty of how much they will pay and appear confident that the Bank of England won’t increase rates at pace during the initial term of their mortgage,” he continued.
Rising stress tests
While speaking at the UK Finance conference, Rowntree said that “Because we now need to stress at 3% above SVR, with base rate SVRs increasing – that’s likely to increase even further and exacerbate this problem [of unaffordability].”
However, Sims said that “ Even with the planned increase to our SVR in December, our discounted SVR mortgage would still be a very attractive rate to borrowers who wish to benefit from the current low interest rate environment.”
After raising the BBR, the Bank of England added that it is expecting two further rises of 0.25% over the next two years, but that “any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.”