Mortgage rates rise for new deals
Published: 20th Apr 2012 14:28:54
Mortgage rates for new borrowers are continuing to rise.
At least 10 lenders, including some of the UK's biggest, have announced rate rises in the past week for people taking out new deals.
Also, Bank of England figures show that the average two-year fixed rate deal, with a 25% deposit, has risen from 2.9% last September to 3.45% in March.
The moves are further evidence that obtaining a mortgage is likely to become more expensive and difficult.
The figure for the average two-year fixed rate deal in September was the lowest on record after rates for such deals had fallen from a recent peak of 6.35% in the middle of 2008.
"Lenders seem to have increased their rates in two stages this week, some at the beginning and the others catching up later in the week," said Aaron Strutt of mortgage brokers Trinity Financial.
Interest rates, as set by the Bank of England have been at a record low of 0.5% for almost three years.
Lenders argue that increasing mortgage rates are due to the rise in the cost of raising funds, from both ordinary savers and the wholesale financial markets, to then lend to homebuyers.
Sue Anderson, of the Council of Mortgage Lenders, said: "Funding costs have been experiencing upward pressure for 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," she added.
In March, the Bank of England reported that banks and other lenders were preparing to restrict their mortgage lending even more in the coming months.
When you take into consideration that some lenders have raised their rates at least twice in the past month, they all add up”
That was despite the lenders expecting to see a rise in demand from potential borrowers.
Among those making changes to parts of their mortgage ranges this week have been Abbey, HSBC, Halifax, Lloyds TSB, Santander, Britannia, and Cheltenham & Gloucester.
Their new deals, for fixed, tracker or discounted home loans, have typically been repriced with interest rates now between 0.1% and 0.4% higher than before.
"When you take into consideration that some lenders have raised their rates at least twice in the past month, they all add up," said Aaron Strutt.
In some cases, deals have simply been withdrawn, leaving existing but more expensive ones on offer.
At the start of April, the financial information service Moneyfacts noted that the past two months had seen a sudden drop in the total number of mortgage deals available to borrowers.
Even before that, lenders had started to rein in their riskier interest-only mortgage lending, with many lenders now demanding at least a 50% deposit from borrowers interested in this type of loan.
The National Association of Estate Agents (NAEA) said that development, along with the end of the stamp duty concession for first-time buyers last month, might lead to sales falling back again, after they had picked up in the run-up to the expiry of the concession.
"The recent move by some major lenders to severely limit the availability of interest-only mortgages is no doubt dampening the levels of supply in the market," said Wendy Evans-Scott of the NAEA.
In the past six weeks, several lenders have also announced increases to the cost of their standard variable rate mortgages for existing borrowers.
At 08:00:54 in EnglandAbout 400 jobs are to be created across Teesside and North Yorkshire thanks to £30m of investment from Quorn Foods.
At 07:59:42 in Northern IrelandAn independent ambulance service has said lives are at risk after £10,000 worth of equipment was stolen from one of its vehicles in Londonderry.
At 07:57:44 in WorldThe South Korean school devastated by the loss of many of its students in a ferry disaster last week has started to hold classes again.
At 07:51:52 in EnglandPart of the M42 in the West Midlands has been closed after a lorry overturned, spilling diesel on to the motorway.
At 07:46:39 in WalesThe One Show's Alex Jones, Olympic athlete Iwan Thomas and tenor and Radio Wales presenter Wynne Evans are among the baton bearers for the Wales leg of the of the Commonwealth Games build up.
At 07:44:08 in SportFootball Association of Wales chief executive Jonathan Ford hopes the Uefa Super Cup will act as a platform in Cardiff's bid to be one of the host cities for Euro 2020.
At 07:38:26 in WorldThree foreigners have been shot dead by a security guard at a hospital in the Afghan capital, Kabul, officials say.
At 07:33:32 in BusinessSouth Korea's economy grew more than forecast in the first quarter, helped by a jump in construction and exports.
At 07:33:28 in SportTrainer Gary Lockett says talks have begun about a rematch between Enzo Maccarinelli and WBA light-heavyweight champion Jurgen Braehmer.
At 07:29:11 in EnglandPolice are continuing to question a 42-year-old woman suspected of murdering three of her children in south-west London.
Harvard CitationBBC News, 2012. Mortgage rates rise for new deals [Online] (Updated 20th Apr 2012)
Available at: http://www.ukwirednews.com/news/1423645/Mortgage-rates-rise-for-new-deals [Accessed 24th Apr 2014]
News In Other Categories
Football Association of Wales chief executive Jonathan Ford hopes the Uefa Super Cup will act as a platform in Cardiff's bid to be one of the host cities for Euro 2020.
South Korea's economy grew more than forecast in the first quarter, helped by a jump in construction and exports.
An independent ambulance service has said lives are at risk after £10,000 worth of equipment was stolen from one of its vehicles in Londonderry.
Shares in Qualcomm, one of the world's biggest chipmakers, fell 5% in after hours trading as it issued a weaker than expected growth outlook.
The number of older people in England needing care will "outstrip" the number of family members able to provide it by 2017, a think tank has warned.
Cult comic character Frank Sidebottom has inspired a film starring Michael Fassbender, while a documentary and biography are also in the works. Four years after his creator Chris Sievey died, why is Frank's legend growing and who was the man behind the mask?