Interest rate rise exceeded by some lenders
Over the past year mortgage holders on variable rate mortgages have really felt the pinch, with no fewer than four interest rate rises being enforced by the Bank of England since August of last year.
The Bank of England, in a bid to try and bring inflation under control, has raised the base rate by 0.25 percent four times, which was in August 2006, November 2006, January 2007, and the final one in May 2007. Many economists predict that the summer will see another interest rate rise, which will put further financial strain on mortgage payers in variable rates.
Although the interest rate rise was only announced a couple of weeks ago, some lenders have already applied the rise to variable rate loans, which means that borrowers receive no reprieve and have to start paying the increased repayments pretty much right away. And to make matters worse, some lenders have actually increased their rates by more than the 0.25 percent rise, which means that borrowers will be paying even more in terms of their monthly mortgage repayment.
According to figures, the offset variable rate from Intelligent Finance has been increased by 0.35 percent, and the rate from Standard Life has gone up by 0.3 percent. Also, whilst some lenders are holding off applying the interest rate increase until June, some lenders have already done this. This includes First Active and Bradford & Bingley. Those expected to raise their interest rates in June include Lloyds TSB, Halifax, Northern Rock, and Nationwide.
Lenders have also increased their fixed rates in order to reflect the new interest rate, so those hoping to avoid the pinch of further rate rises by switching to a fixed rate will now have to fix their loan at a higher rate in order to do this.
One analyst stated: 'We are seeing the effect of the base rate on variable rates coming through. Nationwide has raised all its fixed rate deals by 0.1% today.'
4th June 2007
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