The Nationwide, Britain’s largest building society, yesterday announced an increase in its standard variable rate (SVR) from 2.5% to 3.99%. The SVR is the interest rate that borrowers pay when their existing mortgage deal ends, whether it be a tracker or a discounted deal and the rise will affect around a third of Nationwide’s borrowers.

For a homeowner with a Nationwide mortgage of £150,000 on the society’s SVR, this means that their monthly repayments will increase from £673 to £791, an increase of £118 a month.

The Society says that the change will enable it to promote better interest rates to its savers – but so far their rates to savers have not changed.

A spokesman for the Nationwide said, “This is about balancing the needs of savers and our borrowers, which has become increaingly difficult in the current economic climate. We feel that our 1 million mortgage customers have benefitted from a boost for some time now and this will give us chance to give something back to our 10.4 million savers”.

The Nationwide’s move has raised concerns that other lenders will follow suit.

One of their main competitors said, “At present we have no plans to increase our SVR but we will keep it under review.” For those that do not understand “bankers speak”, this means, “This has totally taken us by surprise. At the moment we have not decided what to do but we’ll have a meeting this afternoon and we’ll almost certainly follow suit”.