Santander Follow On Rate

QuotesUK · 10 February 2018 at 3:24PM

I have a Standard Variable Rate Mortgage with Santander. They have offered me the option to switch to a Base Rate Tracker, a Follow On Rate, which is currently cheaper.

In February 2018, the SVR is 4.74%, the FOR is 3.75% (Bank of England base rate plus 3.25%)

As we all know the Bank of England rate is likely to increase, so the FOR rate will increase. But Santander will probably increase the SVR too. Once you switch from SVR to FOR you can’t go back.

Santander passed on the recent base rate increase, so what would be the benefit of staying on SVR?

kingstreet · 10 February 2018 at 4:24PM

You're being offered a customer retention product. The follow-on rate is what you get automatically at the end of a special offer, for example standard variable rate after a two year fix.

Why not ask Santander about its fixed rate customer retention products, or look to remortgage elsewhere as this can often be done without cost?

QuotesUK · 10 February 2018 at 4:38PM

A credit reference issue currently blocks new lenders and the fixed rate deals from Santander aren’t attractive. FOR is only automatic for new products.

However, given the choice between SVR and FOR, I am interested in knowing why anyone would want to stay with SVR.

kingstreet · 10 February 2018 at 4:42PM

Does the tracker have any early repayment penalties?

If it does, there is your answer.

QuotesUK · 10 February 2018 at 5:25PM

There are no fees or early repayment charges. The only difference is the FOR rate is determined by the bank base rate instead of the SVR rate which is set by Santander.

Thrugelmir · 10 February 2018 at 6:53PM

QuotesUK wrote: »

Santander passed on the recent base rate increase, so what would be the benefit of staying on SVR?

Very little. Seems as if the SVR is being phased out. You are better off taking a 5 year fix rate product at a lower rate of interest. Then reconsidering your options at the of the term.

Cronky · 7 March 2018 at 2:38PM

It's a cheeky ploy by Santander:

Santander has an uncompetitively high SVR at 0.75% above that of it's peers. This is a big problem for them as they are now required to assess affordability for new borrowers at 3% above their "revert to rate".

But the problem with just lowering their SVR to a more competitive rate is that vast numbers of their customers are paying the current SVR -either through ignorance or are trapped as "mortgage prisoners". £23.3 billion in lending from their own figures which is 15% of their total lending is currently paying the standard variable rate of interest at 4.74%

Which is why they have come up with this new "follow on rate" which is for new customers and is a full 1% lower than the current SVR.

So it seems as though Santander wants to have it's cake and eat it. It wants to attract new customers but it also wants to keep the £233million per year that a 1% reduction in their SVR would equate to.

It also leaves the possibility of raising their SVR even further in the future and not affecting their lending competitiveness.

But is it within the rules? I suspect not but only time will tell when the Ombudsman starts reviewing complaints.

Let's not forget that Halifax and Nationwide tried something very similar in 2002 and ended up paying millions in compensation. But hey! The board of Santander obviously think it's worth a punt!

Old_Git · 3 April 2018 at 2:26PM

I phoned Santander twice today (got cut of both times ).My mortgage deal ends in July .Currently I pay 1.94% .
I want to overpay so the fixed rate wasn't a good option for me .
I was offered two tracker rates but with £999 fees .Not realistic for the amount I owe ,so I will probably take the FOR of 3.75% .

Santander Follow On Rate

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