How will rising rates hit borrowers on SVRs and can they escape?

We do come across many people who are on their lender's SVR for one reason or another. During the low base rate period, they just let it ride and didn't want the hassle of switching. Others are mortgage prisoners from the last financial crisis, stuck with companies that no longer lend or exist. I met with a client yesterday whose interest-only rate is due to end in December - their current rate is less than 2% - the Lenders current SVR is 8.29% - without action their payments will increase by almost £800 per month. This client was lucky - despite being hit by the cost of living crisis their income meets other lenders' affordability and we can get them a much better deal - however other clients, who are not so fortunate, look like they will have no option but to product switch which means they may not get the cheapest rates on the market as they just don't meet the new tougher criteria that lenders have put in place over the last few months.

At the moment some Standard Variable Rates (SVR) are well over 9%, but they are not designed for long term borrowing, typically where someone may be about to move home or even repay a large lump sum to avoid any penalties. Many lenders will offer some form of discounted or tracker mortgage, with little or no early repayment charges, should a borrower need to keep that flexibilty a while longer. Lenders such as Nationwide and Santander typically offer equivalent tracker products to the traditional SVR, saving a con siderable amounrt of interest. A number of Building Societes offer a similar product, so speak to a mortgage broker to check what you could qualify for. But the majority of mortgage lenders will offer alternative products to SVR on their Product Transfer ranges, so unless you have ignored the many lender and broker communications about your upcoming maturity, this isn't a place you would want to be for too long.

Clients on an SVR can be through choice (low mortgage), pending house sale, or wish to make large overpayment over lender allowances. Some clients are trapped on SVR due to the inability to switch lenders, based on affordability or adverse history, or existing lender, unable to provide Product Switch options (these are the trapped clients) - however am now seeing clients that have had discounted rates placed September to December last year, that are now being affected by lenders SVR changes. SVR changes can vary from High Street lenders - 7.74% upwards to specialist lenders as high as 9.65% - worrying indeed if you are trapped. That said, there are a few dotted Building Societies that are holding fast (at the minute) with one as low as 5.19%.
Those "my mate down the pub said..." clients, thinking rates will drop - need to speak to a qualified Mortgage Advisor to look at all options...and not bury their heads in the sand - rates will not drop drastically anytime soon that's for sure