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‘Massive variation’ in SVR could come under scrutiny in Consumer Duty
Lenders’ standard variable rates (SVR) have a “massive variation” typically varying between 6.99 per cent and 7.74 per cent, but this could come under scrutiny under Consumer Duty, a broker firm said.
According to John Charcol, there is a “significant disparity” in what mainstream lenders charged their customers.
Research by the firm showed that the lowest SVR on the market is 5.19 per cent from Newcastle Building Society, while the highest is Virgin Money at 8.24 per cent. A mid-point is Barclays’ SVR at 7.74 per cent.
The broker said that several building societies have SVRs between six and seven per cent.
John Charcol also noted that there was “massive variation” in lenders’ SVRs and the stress test margin would need to looked at in conjunction with them.
SVR is the background rate that lender charges interest and is set by the bank. It is linked to the Bank of England base rate, so when the base rate increases SVRs typically increase although it is at lenders’ discretion.
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Nicholas Mendes, mortgage technical manager at John Charcol, said: “When Consumer Duty comes into effect on 1 August this year, the FCA will be looking at outliers and so any lender with an SVR well above the norm will need to be able to justify it to the FCA.”