Lenders up fixed-rate mortgage rates

Friday, 26 September 2008 12:50 PM

High street lenders have increased their mortgage rates as the global financial crisis up the cost of borrowing.

As fears of financial failure reappear the cost of lending between banks is rising - as they become unwilling to lend to each other.

The Bank of England has stepped in to pump cash into the markets, but the lenders are still finding they have to increase rates or drop deals.

HSBC is increasing the cost of its two, three and five-year fixed rate deals by 0.30 per cent - although it is cutting fees by £300.

First Direct - a part of HSBC - is increasing rates on its two-year fixed-rate deals by 0.l25 per cent.

Woolwich - the mortgage lending arm of Barclays - is upping its fixed-rate deals by 0.25 per cent and its lifetime trackers are going up by 0.05 per cent.

Yorkshire Building Society has increased its rates on all its fixed rate deals and its two-year trackers by 0.50 per cent.

Britannia, Abbey and Marsden Building Society have all withdrawn products from the market.

Abbey is introducing new three and five-year fixed rate mortgages at 85 per cent loan-to-value (LTV) at 6.34 per cent with £995 fee.

"We are withdrawing the range of two-year deals at 85 per cent LTV. This is in line with customer demand, which in recent months has shown a big swing towards medium term deals," an Abbey spokesperson said.

Bradford & Bingley has also announced a series of job cuts that will see it almost entirely leave the mortgage market.

However, Scottish Widows Bank has managed to cut its mortgage rates.

The lender is reducing the rates on its two, three and five year fixed rate deals by 0.24 per cent, as well as expanding its range.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "Last week's unprecedented worldwide financial crisis led to an immediate jump in LIBOR as liquidity reduced and banks became increasingly reluctant to lend to each other.

"It has taken only a matter of days for the impact of this to feed through to new borrowers - with a double whammy of higher interest rates and tighter lending requirements."

While the mortgage market is not closed to new business, Ms Cuming claims "it isn't stretching the point too far to say it is only open to people with impeccable credit records and a deposit of 25 per cent or more".

She added: "HSBC has tried to help the situation by making some concessions and reducing fees, but for the average mortgage borrower, the net effect will be an increased cost. Only Scottish Widows Bank has bucked the trend with some welcome rate reductions.

"All in all, a grim week in the mortgage market which has undoubtedly quashed earlier shoots of optimism that were starting to show. As I feel things will not get better, the message is to act quickly if you need to secure a mortgage."

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