The Halifax became the first large lender to raise rates this week when it moved from 8.1 to 8.35 per cent. The society had said it was not keen to increase rates, but in spite of negligible pressure on savings it moved - just in time to affect the payment level of the 1.1 million of its 1.8 million borrowers on an annual review payments system.
These borrowers will move from 7.64 per cent - the lowest that mortgage rates have touched in recent years - to the new rate in April.
There is a widely held view that rates will be raised again before Easter if inflation continues to threaten a reappearance. It would not be surprising if rates were raised yet again before the end of the year, which would mean a hefty increase next yearfor those on annual review. Those on annual review with Nationwide or Bradford & Bingley have already had their rates set for the coming year and will be able to postpone paying the new rate.
Borrowers with a loan of £30,000 or over face a further increase in mortgage costs of about £10 a month as a result of the reduction in mortgage tax relief to 15 per cent.
Cheltenham & Gloucester Building Society has said it will not raise its mortgage rate unless there is a further increase in base rates. It can afford to pitch its savings rates at a slightly uncompetitive level as its savers are waiting for payouts averaging £1,000 per account as a result of the takeover by Lloyds Bank. But savers at Halifax as well as Leeds are in line for payments as a result of the planned amalgamation of the two societies and the flotation of the merged society next year.
The tiny Newbury Building Society, with 11 branches and 5,000 borrowers, has also said it will not raise interest rates.
Brian Burgham, marketing manager, said: "We are a mutual organisation. We do feel we should be able to do something for our existing borrowers. It's the least we can do. We will do it by trimming our profits.''
The society, he said, had healthy reserves and made a profit of £1.5m last year and £1.2m in the previous year.
The slight variations in interest rates between societies translate into perceptible differences in monthly payments. For instance, at the new rates a £50,000 interest-only loan would cost £306.17 with Halifax, £309.47 at Nationwide, and £314 at Birmingham Midshires.Reuse content