Halifax triggers more rises and grumbles from rivals rises and

Click to follow
The Independent Online
Halifax Building Society kicked off a wave of mortgage interest rate rises yesterday with a 0.25 percentage-point increase to 8.35 per cent. The rise takes effect immediately for new customers and from 1 February for existing borrowers.

Nationwide swiftly followed suit with a slightly larger increase. Its mortgages rise by 0.4 points to 8.44 per cent. The rise is delayed until 13 February for new borrowers and 1 March for current Nationwide mortgage holders.

Most other lenders confirmed they would be increasing rates soon but had not yet decided on the exact level or timing.

But Cheltenham & Gloucester, which is being taken over by Lloyds Bank, said it would not raise its rates. Andrew Longhurst, C&G's chief executive, said: "We see no reason to increase our mortgage rate at the present time.''

And a spokesman for Abbey National said: "We are disappointed with the rate rises from the Halifax and Nationwide. We had hoped to keep our rates unchanged but will now make a decision in due course."

It is unlikely savers will withdraw their money from C&G at the moment even if its rates become uncompetitive. Investors are waiting for bonus payments averaging more than £1,000 per account that will flow from the Lloyds takeover.

Halifax's savers have been warned by the society that by withdrawing funds they could jeopardise the amount they would receive as a result of theplanned merger of the Halifax and Leeds societies and the conversion of the new organisation to a public company.

Halifax said that other lenders had been waiting to see where it would pitch its new rate, and it had deliberately kept the increase below the 0.5 per cent rise in base rates last December.

"Once short-term rates moved we had to respond. We wanted to increase our savers' rates,'' it said.

Ian Darby, marketing director of mortgage brokers John Charcol, said : "In our view the rise was not necessary. They are working on margins of more than 2 per cent, and by historic standards it's incredibly profitable lending."

Rob Thomas, housing analyst at stockbrokers UBS, said: "There weren't any serious reasons for them to increase the rate. They could have held out without doing it.''

By moving before the end of the month Halifax will be able to set the payments at the higher rate for more than 1 million of its 1.8 million borrowers who are on the annual review system. Their payments will rise from 7.64 per cent to 8.35 per cent.

But the 400,000 borrowers at Nationwide - about a third of their borrowers - who are on annual review had their new payments set at the end of December and will miss the new rise for this year.

The monthly cost of a £60,000, interest-only loan from Halifax rises by £11.25 to £375.75, while the same loan from Nationwide increases by £13.50 a month to £361.80.

The cost of mortages over £30,000 will rise by about £10 a month after April when tax relief is cut to 15 per cent.

Comments