Mortgages hiked despite base rate freeze
The Bank of England kept rates on hold last week at 5.75 per cent, however figures revealed that households face the highest mortgage rates for nine years.
Britain’s second-biggest mortgage lender Abbey has become the first High Street bank to raise its mortgage rates. Other major lenders are likely to follow.
The increase - of between 0.1% and 0.2% - applies to the lender’s tracker mortgages. And to new customers only. The bank cites the recent turmoil in global credit markets as the principal reason for making its move now.
The so-called credit crunch, which started in the US sub-prime mortgage market but has since spread, makes it more costly for banks to borrow to money. And when that happens banks invariably pass the cost on to customers.
Howard Archer, of financial analysts Global Insight said: ‘A substantial number of homeowners will see their mortgage bills rise markedly during the latter months of the year as the cheap fixedrates they took out two years ago expire.
‘Meanwhile, the higher money market interest rates resulting from the current financial market turmoil means that some mortgage rates are set to rise.’
The Council of Mortgage Lenders warned last month there has been a 30% rise in repossessions in the past year.