Homeowners on standard mortgage deals are being forced to pay interest rates of more than 8 per cent for the first time since 1999. Bank of Scotland and Birmingham Midshires, both divisions of HBOS, the biggest mortgage lender in the UK, increased their standard variable rates (SVRs) yesterday to 8.1 per cent and 8.19 per cent, respectively.

The rates increased to more than 8 per cent after the lenders passed on last week’s quarter-point base rate rise. Only a fraction of borrowers take out mortgage deals pegged at their lender’s SVR, preferring cheaper short-term deals instead. But many end up paying the SVR when their short-term deal comes to an end while they are negotiating a new loan.

In addition, many homeowners who have nearly repaid their mortgage often choose to pay their lender’s SVR rather than pay large arrangement fees to lock into another short-term loan. Lisa Taylor, of Moneyfacts, the price comparison website, said: “If you have a small outstanding mortgage and are paying the SVR, this is really going to hit you in the pocket. Unsecured lending is now cheaper than these rates.”

Masterloan charges 6.1 per cent interest on an unsecured personal loan of £25,000. Some Birmingham Midshires customers who took out a home loan after 2001 will not have to pay an SVR of 8.19 per cent, as the lender introduced a new, lower rate for them when their short-term deals came to an end. They will typically be paying about 7.74 per cent.