Northern Rock increases fixed rate mortgage cost

Nationalised bank Northern Rock today announced that it was increasing the cost of a number of its fixed rate mortgage deals.

The group is raising rates on its two, three and five-year fixed rate loans by between 0.2 per cent and 0.3 per cent.

It said the move was to ensure it did not breach competition constraints placed on it to prevent it from taking advantage of its Government backing.

Under these rules, Northern Rock is not allowed to write more than 2.5 per cent of all new mortgages in a year.

It must also avoid appearing at the top of a best-buy table for a "prolonged period of time".

Before the changes the group had been offering a two-year fixed rate mortgage of 4.99 per cent for someone with a 25 per cent deposit who paid a £995 arrangement fee, which was the second best deal available. This loan has now been increased to 5.19 per cent.

The group was one of a number of lenders that was quick to cut its standard variable rate (SVR) following this month's cut in the Bank of England base rate.

It passed on the full 1.5 per cent to give a new rate of 5.84 per cent, although the deal is only available to existing customers coming to the end of a fixed term deal.