Halifax hikes mortgage rates
THE UK’s biggest mortgage lender announced today it was raising its mortgage rates, with analysts warning others would follow suit.
Halifax, which accounts for one in every five mortgages in the UK, is increasing the rate charged on 20 of its tracker mortgages for new customers by between 0.1 per cent and 0.2 per cent from tomorrow.
The move comes the day after Britain’s second biggest lender Abbey announced it was increasing its tracker mortgage rates by the same amount for new customers from today.
Paul Fincham, of Halifax, said: “It is a combination of things. Pricing has changed in the markets. Also we have seen other lenders move, so we needed to adjust our rates.” The hikes, part of the ongoing response to volatility in the global credit markets, come as Chancellor Alistair Darling today urged a more cautious approach to lending.
Standard Life is due to increase its rates next week, although it has not yet said by how much, while specialist lender Capital Home Loans is also raising its rates.
Commentators warned that now the UK’s two biggest lenders had hiked their rates, other banks and building societies were likely to follow suit quickly.
Ray Boulger, senior technical manager at independent mortgage experts John Charcol, said there was likely to by an “acceleration” in the trend.
He said: “This gives some comfort to other lenders who are thinking of moving and didn’t want to be first. The longer that lenders think this [volatility] will go on, the more reason there is for them to put their tracker rates up.” He also warned some lenders might also increase their standard variable rates, which would affect existing customers who were on discount mortgages.
Banks are raising their rates in response to an increase in the inter-bank lending rate.
It comes as a result of the crisis in the US sub-prime mortgage market, which lends money to people who would be turned down by mainstream banks. High levels of defaults on these loans, which some claim should never have been advanced in the first place, have rocked global credit markets, as the loans are packaged up and sold on to investors to spread the risk.
The increase in mortgage rates in this country is the first sign that the problems which began in the US are hitting UK homeowners directly. Meanwhile, the Royal Institution of Chartered Surveyors warned that house prices fell during August for the first time in more than two years.
At the same time, it said inquiries from new buyers fell for the ninth month in a row and at their fastest pace for three years, as potential buyers waited to see what impact recent rises in the official cost of borrowing would have on the property market.
Edinburgh South MP Mr Darling urged banks to adopt a more cautious approach to lending, signalling Treasury concern over the impact of years of easy credit.
He added people on both sides needed to “think long and hard” about the risks involved, and suggested a return to “good old-fashioned banking” would be helpful.
