Agents call on mortgage lenders not to raise cost of home loans

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The Independent Online

Mortgage lenders were urged not to pass on yesterday's interest rate rise to homeowners as estate agents condemned the move as "totally unnecessary" and debt experts warned of a growing crisis.

Mortgage lenders were urged not to pass on yesterday's interest rate rise to homeowners as estate agents condemned the move as "totally unnecessary" and debt experts warned of a growing crisis.

New research published yesterday, which may revive allegations of profiteering, showed mortgage rates will be a quarter-point higher than the last time base rates hit 4.75 per cent three years ago.

Savills Private Finance said a survey of the top 15 lenders found a quarter-point rise would push the average mortgage rate to 6.55 compared with 6.28 three years ago. One lender would open up a 0.6 percentage point gap. "Perhaps lenders should consider foregoing this quarter-point rise to bring themselves back into line with previous levels," its director Simon Jones said.

But there was little sign of restraint as Abbey became the first bank to raise its standard variable rate by a quarter-point to 6.75 per cent.

The Council of Mortgage Lenders said typical buyers with £100,000 interest-only mortgage would see their bills go up by £250 a year - although the cumulative rise since last November is £1,250.

Estate agents said there was clear evidence that prices were already falling. Russell Jervis, the managing director of haart estate agents, said: "If this rate rise was supposed to cool the housing market, it has been totally unnecessary. Sellers are being forced to offer discounts to achieve a sale."

The latest rise has fuelled concern that Britain's heavily debt-burdened households are facing a credit crisis. Vince Cable, the Liberal Democrats' Treasury spokesman, said: "If rates continue to rise to 5.25 or 5.5 per cent, or house prices fall, many may find themselves in serious difficulty."

The Consumer Credit Counselling Services said it had taken its 100,000th call for help this year earlier this week.

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