The Cost of Home Loans Rises
The UK's largest mortgage lenders will be the first to raise the cost of the homes loans by raising their interest rates and will come into effect on February 1. The Halifax and Nationwide have reacted to last Thursday's surprise 0.25 per cent base rate increase by the Bank of England by passing the rise onto customers.
The rise in interest rate will see the Halifax raise its standard variable rate to 7.25 per cent, whilst the Nationwide will raise its equivalent rate to 6.74 per cent.
The good news for both lenders customers is that both have promised to raise the interest rates paid on their variable-rate savings accounts by the same amount.
Other UK mortgage providers are expected to follow suit, with the cost of home loans set to further the slow down of the UK housing market as the cost of mortgages increases.
Ray Boulger, senior technical specialist at mortgage broker John Charcol, said: "Most lenders will put their rates up by 0.25% but some will go up by more than that – they will take the opportunity to increase margins."
After last November's increase in the bas rate, Boulger said the majority of lenders decide to pass on the full 0.25 per cent increase onto their customers.
Some lenders, like the Abbey for example, opted for a bigger rise by increasing its standard variable rate (SVR) by 0.34 per cent to 7.9 per cent. However, Portman Building Society decided on a smaller increase, raising its rate by 0.24 per cent to keep its SVR at 6.99 per cent.
As many financial experts anticipated, the Bank of England's raising of the base rate will see the full increase passed onto lenders' customers.
Louise Cuming, head of mortgages at moneysupermarket.com, feels the third rise in the base rate in the last five months, will increase the financial strain on may of the UK's homeowners. She said: "This will be a real blow to many homeowners who may not have factored in an additional base rate rise – indeed, many commentators failed to see it coming – so it is likely that some homeowners will have been caught short."
Alisdair Milton
19th January 2007
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