Abbey to raise mortgage rate

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HOPES that the 2.1 million home buyers with loans from the Abbey National might escape the current round of mortgage rate rises are likely to be dashed tomorrow, when the bank is expected to announce an increase in rates.

Ever since the rise of 0.5 per cent in base rates last December the Abbey, the second-largest mortgage lender in the UK, has been holding out against a rise, fearing it would damage the fragile housing market.

The largest building society, the Halifax, last week lifted rates by 0.25 points to 8.35 per cent. For a borrower with a £30,000 repayment loan, the monthly cost rises by £3.79 to £199.49. For a £60,000 loan, the increase is £8.83, to £440.73.

Abbey borrowers will move from the old rate of 8.09 per cent to the new rate, probably on 1 February. Charles Toner, managing director of Abbey National retail services, said: "We don't want to increase rates, but we have to react to competition on the savings side."

After recent rises, rates stand at: Halifax 8.35 per cent, Leeds 8.39, Nationwide 8.44 (from 1 March for existing borrowers), Bradford & Bingley and National & Provincial 8.45.