Home loan rates may increase

MORTGAGES FOR new homebuyers are likely to rise despite the Bank of England's decision to keep base rates on hold, leading lenders warned yesterday.

The Council of Mortgage Lenders said that it was becoming more expensive for banks to borrow money long term on the international money markets as economists started to forecast rises in interest rates over the next few years. The banks had to recoup these extra costs from their customers, it explained.

Michael Coogan, the CML's director-general, said it was unlikely that variable mortgages would change in the wake of yesterday's decision to keep rates at 5 per cent.

But he added: "For new borrowers, the increase in the cost of raising longer-term funds on the money markets seen in recent weeks is likely to result in marginally higher fixed- and capped-rate products."

Mortgage lenders are already under fire for failing to pass on to borrowers the benefits of the last two 0.25 per cent interest cuts.

While base rates have fallen 2.5 per cent since last October, Nationwide building society, for example, has cut its standard variable rate from 8.5 per cent, in October, to a 33-year low of 6.45 per cent - a difference of only 2.05 per cent.

A borrower with a pounds 60,000 interest-only mortgage pays pounds 306.38 a month now, compared with pounds 403.75 in October. If mortgage rates had fallen to 5.95 per cent, the monthly payment would be just pounds 282.63.

A Nationwide spokesman said: "We have to balance the needs of our savers, who have seen rates cut."

Fixed rates have already started to climb. Last month Halifax, the UK's biggest lender, raised its five-year fixed rate by 0.5 per cent to 6 per cent, following the 1 per cent rise in the cost of five-year money on the global markets.

Promise, the remortgaging arm of Credit Suisse, said the bank's decision was a relief to mainstream lenders, whose "fat profit margins" had been squeezed by recent rate cuts.

Neil Walkling, principal money researcher for the Consumers' Association, said lenders had to respond to changes in global markets.

But he added: "We think banks should be fair and transparent. They should not sneak in extra savings cuts while pretending they are trying to protect savers. But we appreciate they have to manage their balance sheet."

Kevin Gardiner, an economist with the City bank Morgan Stanley, said the financial markets were expecting rates to rise to 6.5 per cent by the end of next year.

"Fixed-rate mortgages have been selling like hot cakes. Not for the first time, the humble consumer may have been quicker than many City analysts at spotting a potential turning point in interest rates."

Euro tumbles, page 18

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
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 General

IT Project Manager

Competitive: Clearwater People Solutions Ltd: Our client based in Chelmsford a...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

IT Manager

£40000 - £45000 per annum + pension, healthcare,25 days: Ashdown Group: An est...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London