Abbey in mortgage warning

ABBEY National yesterday fired a shot across the bows of the Government, warning that it may have to put up mortgages if National Savings begins to damage its inflow of money, writes Peter Rodgers.

But Abbey denied a news agency report that stirred anxiety in the City which said that a move could come 'possibly in a couple of weeks'. It said National Savings was not yet a big enough threat to force the bank to consider an interest rate rise. A move could be triggered if the National Savings First Option Bond launched last week began to damage savers' inflows to banks and building societies.

A spokesman said so far there had been no impact on the savings inflow to the bank. 'The position we are in, like many others, is that if there is a squeeze on retail savings - which there is not - we would have to consider upping savings and mortgage rates.'

Abbey had to spend the afternoon reassuring anxious questioners from City banks and securities houses that there was no immediate prospect of a rise in rates.

Last summer, threats from banks and building societies to raise deposit rates - and pay for it with higher mortgage rates - forced the Government to back-pedal on National Savings. But this year the public sector borrowing requirement has risen further, making it harder for the Treasury to ease off.

Halifax Building Society said yesterday that it had no intention of raising its mortgage rate.