So Skipton Building Society has decided to scrap the ceiling on its standard variable rate (SVR) and increase the rate from 3.5% to 4.95%.

The promise that mortgage borrowers on the SVR would never pay more than 3% over base rate is no more…well, temporarily no more.

Image: ‘What’s all the fuss about scrapping ceilings?’

The society says that it had to respond exceptional market conditions, ones which have seen the Bank of England keep the base rate of interest at an historic, 315 year low of 0.5% since March last year.

The credit crisis has seen the funding that most banks and building societies rely upon to function become unusually expensive too.

Having had an exceptional circumstance clause written into its contracts since 2002, Skipton is perfectly within its rights to make the change that it has.

What is more, the rate remains below the average SVR of the top ten building societies of 5.12%.

But does this justify an action that will reportedly have a significant financial impact on around 30,000 borrowers immediately and possibly another 35,000 in the coming months?

Some clever people somewhere have worked out that the rate rise means a borrower with a £130,000 interest only mortgage will see £157 added to the cost of their monthly repayments.

Those with a similar sized repayment mortgage would see their monthly outlay rise by £105.

Perhaps the Skipton customers who can’t afford to meet their revised repayments could claim exceptional circumstances too and keep on paying their old amount?

To be fair to Skipton, it has not been the first lender to raise its SVR (other smaller lenders have done so while base rate has remained unchanged), and it is highly unlikely to be the last, particularly now that one of the big providers has broken ranks.

Borrowers with other providers could therefore soon find themselves in the same boat too.

All this suggests the time to move away from the SVR might soon be nigh.

Skipton’s SVR borrowers will undoubtedly be looking forward to the exceptional circumstances soon passing so that the ceiling can be reintroduced.

Let’s hope the ceiling hasn’t fallen in on their home ownership dream before then.

Tim Leonard, Senior Reporter, Moneyfacts Group