Mortgage rates on the up again

25 September 2008

Global credit crunch forces banks to increase rates

Mortgage interest rates are set to increase again, with banks and building societies placing the blame on the current global financial crisis.

From tonight Abbey, the second largest mortgage lender in the UK, will withdraw some of its most competitive deals.

Yesterday, Yorkshire Building Society increased its home loan rates by up to 0.4%, increasing the cost of the monthly payment on a £150,000 mortgage by £50.

In the coming days Lloyds TSB, Northern Rock and Woolwich are expected to increase their mortgage rates too.

The increases come because “swap rates” have shot up in money markets, which means that it is costing the banks and building societies more to find the funds used to give consumers mortgages.

According to mortgage experts, this is the start of a trend of increasing rates and the withdrawal of mortgage deals.

Darren Cook, of Moneyfacts.co.uk, said: “It is like they have just suddenly turned the tap off again.

“Yorkshire Building Society said it had no choice but to raise rates by up to 0.4 of a percentage point, after being swamped by applications in the past two weeks. It blamed the soaring cost of interbank borrowing [swap rates],” he added.

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