Mortgage rates resume upward path
Updated on 19 September 2008
Mortgage rates have resumed their upward path with one lender hiking the cost of its deals by up to 1.6%.
Other lenders are expected to follow suit and raise the cost of their fixed rate and tracker deals next week after a key inter-bank lending rate hit a five month high.
First National, part of GE Money, announced it was raising its rates across the board by 1.6% for people borrowing more than 80% of their home's value and by 0.8% for those borrowing less than 80%.
At the same time iGroup, which is part of the same group, said it was hiking its deals by 1.7% for people with less than a 20% deposit and by 1.1% for those who had at least a 20% one.
The lenders, which operate in the non-conforming market, also announced that anyone who had already submitted a mortgage application would have to pay the new rates unless they could complete their deal by October 3, angering brokers.
The move was blamed on the steep increase in funding costs seen this week amid the global financial turmoil. The rise leaves a three-discount mortgage with First National for someone with only a 10% deposit at 9.59%.
Other lenders across the mainstream mortgage market are also expected to raise their rates in the coming fortnight, bringing to an end a period of falls in the cost of home loans, which had seen the average two-year fixed rate deal return to its pre-credit crunch level.
One of the key inter-bank lending rates, three-month Libor, continued its upward climb on Friday to reach 6% - its highest level since April 3, when the Bank of England base rate was 0.25% higher.
The rate has now increased by just under 0.3% since last Friday, although today's rise was a more muted 0.02%, suggesting it may have found its level in the current environment.
At the same time swap rates, upon which fixed rate deals are based, have also risen sharply during the past week, with two-year swaps expected to end the day at more than 5.6%, having begun the week at 5.2%.
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