Big lenders hike mortgage rates
Updated on 13 October 2008
Two of the UK's biggest lenders today increased their mortgage rates for certain new borrowers despite last week's interest rate cut.
Nationwide is raising its tracker rates by up to 0.3% from Tuesday, while Lloyds TSB is hiking the cost of fixed rate deals by up to 0.34% for people with only a 10% deposit, although rates are coming down for other homeowners.
At the same time, nationalised bank Northern Rock became the first lender to say it was not passing on the full 0.5% reduction in the official cost of borrowing to its standard variable rate (SVR) customers.
Instead the group said it was reducing the rate by just 0.15% to 7.34% from November 1.
The move is particularly bad news for borrowers who had previously taken out 100% and 125% mortgages with the group and have found they are unable to remortgage in the current more risk averse climate when their deal ended, meaning they are effectively stuck on the SVR.
Andrew Hagger of moneynet.co.uk, said: "This move seems to have surprised some people, however when you realise that the strategy of the nationalised Northern Rock is to reduce its mortgage book, it is unpalatable moves such as this that may be sufficient to encourage a few more borrowers to look elsewhere for a mortgage."
Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, is increasing fixed rate mortgages for people borrowing 10% of their home's value by 0.34% to give a new rate of 6.69% for people with a two-year deal who pay a £995 arrangement fee.
But those who have a 25% or 40% deposit will see the cost of fixed rate mortgages fall by up to 0.25%, pushing a two-year loan for someone borrowing 75% of their homes value who pays fees of £1,995 down to 5.49%.
The move further increases the gap between the rates paid by people with large deposits and those with only small ones.
The changes being introduced by Nationwide will leave a three-year tracker mortgage for someone borrowing 90% of their home's value at 6.49%, up from 6.19% previously.
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