Mortgage woe as lenders raise rates in stalled market

Home buyers and remortgagers face soaring borrowing costs after several banks increased mortgage interest rates. HSBC yesterday became the latest lenders to increase interest rates, pushing up the standard cost of its range of fixed rate deals by 0.3 per cent to 6.27 per cent annually.

The bank, which cut 1,100 jobs in investment banking this week, joined a list of lenders raising rates this week, which include Yorkshire Building Society, which increased interest rates on fixed rate and tracker products by 0.5 per cent, and Woolwich and First Direct, which increased rates by 0.25 per cent across fixed-rate ranges.

Melanie Bien, director of the independent mortgage broker Savills Private Finance, says: "Lenders have been waiting for the first one brave enough to pass on recent increases in money market rates – now the floodgates are likely to open. However, the Bank of England is auctioning £40m of three-month loans on Monday which should bring down the cost of three-month Libor – the rate at which banks lend to each other – reducing pressure on the banks to increase tracker rate mortgages."

There are now 3,200 mortgage products available to UK consumers, down from more than 13,500 a year ago. House prices in England and Wales fell by 4.6 per cent to £174,493 in the year to August, down by 1.9 per cent in four weeks, according to the Land Registry.