Major lender raises mortgage rates
Updated on 25 September 2008
HSBC became the first of the major lenders to announce it was hiking its mortgage rates following the recent jump in wholesale funding costs.
The group is increasing its fixed-rate deals for borrowers with just a 10% deposit by 0.3%.
It is also introducing a new loan to value tier of 75% on its fixed-rate range, and it is cutting rates on these deals by 0.2%.
The group justified the move by saying that swap rates, upon which fixed-rate mortgages are based, had risen sharply during the past week following the recent financial turmoil.
It added that mortgages for lower risk borrowers with larger deposits were cheaper to fund than those for people who did not have as much money to put down.
But the group added that it was reducing arrangement fees for people borrowing 90% of their home's value from £799 to £499, while fees for people taking out a 75% loan to value ratio would be £999.
Following the change, which comes into force on Friday, a two-year fixed rate mortgage for someone with a 10% deposit will cost 6.27%, while one for someone with a 25% deposit will cost just 5.79%.
HSBC is the first of the major lenders to increase its rates, but other groups are expected to follow suit in the coming days.
Last week specialist lender GE Money, which lends under the First National and iGroup brands, announced rises of up to 1.6%, while smaller players, such as Yorkshire Building Society, have also increased the cost of some of their deals.
The move by HSBC brings to an end the most prolonged period of falling mortgage rates since the credit crunch first struck.
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