Halifax is third big lender to raise mortgage rate
Halifax Bank, Britain's biggest mortgage lender, confirmed yesterday it would raise the cost of its home loans by 0.25 percentage points, following last week's base rate rise.
Halifax's standard variable rate will rise to 6.75 per cent today, though existing borrowers will not be affected until the end of the month. The increase will cost a borrower with a £100,000 repayment mortgage about £16 extra a month.
Halifax is the third large lender to respond to the decision of the Bank of England's Monetary Policy Committee to increase rates to 4.75 per cent. Cheltenham & Gloucester and Northern Rock have also passed on the rise in full, and rival home loan providers are expected to follow suit.
Nationwide, the UK's biggest building society, played down the impact of the rise on the housing market yesterday as it raised its forecast for house price growth to 5 per cent from between 0 to 3 per cent.
Fionnuala Earley, Nationwide's group economist, said: "The resilience of the market in the face of deteriorating affordability suggests there is still enough demand in the market to support prices." House price inflation jumped to 5.9 per cent in July, according to Nationwide, which was almost double the growth rate at the end of 2005.
Even among first-time buyers, the hardest hit by the soaring cost of property, demand has strengthened. More first-time buyers took out a home loan during June than at any time since December 2002, the Council of Mortgage Lenders said yesterday. But to do so they had to seek financial help from their family, the industry lobby group said.
Its figures showed the average first-time buyer took out a record 3.21 times their income to secure a mortgage in June, up from 3.06 in the same month last year. Michael Coogan, director general of the CML, said: "It is highly likely that more and more young buyers are turning to parents and grandparents to help them raise the deposit for their first home."
Separate data from the Land Registry showed the cost of an average house in Britain was hovering at the £200,000 mark. In London, the average cost of a house is £317,679, about 10 times as much as average salaries in the capital, leaving buyers dependent on mortgage lenders nursing a big funding gap.
Meanwhile, City bonuses are fuelling a rural land price surge as London workers splash out on a second home in the countryside, according to the Royal Institute of Chartered Surveyors. Farmland prices rose 9 per cent from April to June, buoyed by demand from Irish farmers who have sold land to residential property developers.
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