f Mortgage Rates Continue to Rise

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Mortgage Rates Continue to Rise


The cost of getting a new mortgage is continuing to rise, as the likes of Abbey, HSBC, Halifax, Lloyds TSB, Santander, Britannia and Cheltenham & Gloucester have all announced recent interest rate rises in their mortgage portfolios. Although the Bank of England base rate continues to stay at its all time low of 0.5%, lenders argue that increasing mortgage rates are due to the rise in the cost of raising funds, from both savers and wholesale financial markets. These are just the latest moves in a six-week period that has seen the cost of obtaining a mortgage rise, pretty much across the board.  Many lenders have put up their rates twice in this period.

Bank of England figures show that the average cost of a two-year fixed mortgage, with a generous 25% deposit, has risen from 2.9% in September 2011, to 3.45% in March 2012.  An explanation for the reasons behind the increases came from Sue Anderson of the Council of Mortgage Lenders; Funding costs have been experiencing upward pressure from lenders, who have been operating at low margins.  So at some point lenders will take the decision to raise rates for good balance sheet management.

Typically, new deals for fixed, tracker or discounted home loans have been re-priced with interest rates being around 0.1 to 0.4% higher than before.  In some cases, deals have simply been withdrawn, leaving only the more expensive products on offer.  In the case of the much-maligned interest-only mortgage, many lenders are demanding a 50% deposit after strict new regulation by the Financial Services Authority.

Source: bbc.co.uk, cml.org.uk (image courtesy of blog.anglianhome.co.uk)