Building societies pour scorn on Abbey National for pushing up mortgage rate

Mutual building societies yesterday attacked Abbey National for raising its mortgage rate by 0.25 of a percentage point. Nationwide, the largest remaining mutual society, questioned whether Abbey still wanted new mortgage business. Andrew Verity reports.

The debate over the benefits of mutuality was re-ignited yesterday when Nationwide said Abbey's decision to boost its standard variable rate to 8.7 per cent "makes one wonder whether they are serious about doing any new business".

Abbey's increase in the cost of borrowing is in line with the interest rate rise announced last week by the Bank of England. Halifax, which recently converted to a bank, said it was likely to take a decision on whether to follow the rise within a week.

The rise by Abbey prompted mutual building societies to mock the new banks for failing to give customers the best value on mortgages. In Abbey National's case, 1.6 million customers will see mortgage repayments rise.

A spokesman for Nationwide said: "Compared with our rate of 8.1 per cent, they are now 60 basis points higher. They can only be hitting their existing borrowers who may well be tied in to their mortgages.

"We are very sad that the Abbey have had to put their rates up and are concerned for all mortgage holders."

Nationwide said that it had loaned pounds 1.1bn over the last six months. That compared with just pounds 100m by Abbey National, which is 11-times its size.

Both Nationwide and Bradford & Bingley have issued a challenge to other lenders to keep their rates down as low as the mutuals. Bradford & Bingley, which has a variable rate of 7.95 per cent, committed itself last Thursday to leaving mortgage rates unchanged until at least the end of January 1998.

Abbey and Halifax both hit back at the remarks. Andrew Pople, retail managing director at Abbey, said: "During the course of the year, Abbey National has consistently passed on the benefit of base rate rises to savers, who outnumber borrowers by 7 to 1. We see no reason to change our approach on this occasion."

Abbey National said the changes would mean an extra pounds 2.10 a week to the average borrower with a repayment mortgage. However, it has not yet announced new rates for savers, which it said would be announced shortly. A spokesman played down comparisons based on the variable rate, saying 60 per cent of all new mortgages were now fixed-rate mortgages.

A Halifax spokesman said: "We won't be making any announcement today, though now Abbey has moved it has altered the whole market. Any pressure for rate rises is coming from the savings side - from supermarkets and insurance companies."

Abbey's rise means that its average mortgage holder has seen repayments rise by 12.3 per cent since the general election in May. For a repayment mortgage of pounds 50,000 borrowed over 25 years, monthly repayments were pounds 339.60 before the election. Five interest rate rises later, the same borrower is paying pounds 381.30. The across-the-board rise of 0.25 of a percentage point will affect larger mortgages more dramatically. For a 25-year repayment mortgage of pounds 125,000, repayments have risen by 12.7 per cent since May, from pounds 881.87 to pounds 993.69.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
News
i100
News
Budapest, 1989. Sleepware and panties.
newsDavid Hlynsky's images of Soviet Union shop windows shine a light on our consumerist culture
News
In humans, the ability to regulate the expression of genes through thoughts alone could open up an entirely new avenue for medicine.
science
News
Williams says: 'The reason I got jobs was because they would blow the budget on the big guys - but they only had to pay me the price of a cup of tea'
arts + ents
Arts and Entertainment
A sketch of Van Gogh has been discovered in the archives of Kunsthalle Bremen in Germany
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee