Abbey raises tracker mortgage rates
Updated on 04 November 2008
One of the UK's biggest mortgage lenders has announced increases to the cost of its variable rate mortgages, two days before the Bank of England is expected to cut the official cost of borrowing.
Abbey is increasing rates on its two and three year tracker mortgages, which automatically move up and down in line with the Bank of England base rate, for new borrowers by up to 0.5%.
The move comes as the Monetary Policy Committee is widely expected to cut interest rates by at least 0.5% on Thursday, with some economists predicting a 1% reduction.
The group's decision to increase its rates for new customers will effectively cancel out a 0.5% cut, and will halve the impact of a 1% fall in the official cost of borrowing.
Abbey defended the increase saying it was in response to moves made by competitors, adding that it continued to offer market-leading two, three and five-year fixed rate mortgages.
An Abbey spokesman said: "Recent moves by competitors increasing tracker rates and withdrawing products, has resulted in today's decision, which takes effect from Wednesday November 5.
"Despite difficult market conditions, Abbey has continued to provide competitive mortgage deals for all our customers across our range and continues to do so."
The group also announced that it was withdrawing its tracker products for people borrowing 85% of their home's value, with people now needing at least a 25% deposit to qualify for one of the deals.
It is continuing to offer a five-year fixed rate mortgage to people with deposits of between 5% and 20%, but all other loans are now restricted to people borrowing 75% or less of their property's value.
Abbey is the latest of the major lenders to hike its tracker rates, after Nationwide increased the cost of its tracker deals by up to 0.4%, and Halifax increased its five-year trackers by up to 0.5%.
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