Mortgage suffering

Fears As Lenders Set To Raise Mortgage Rates�??

Last Updated 18:39 03/03/2012
Tadhg Enright, business reporter
Homeowners are set to suffer higher repayments as two mortgage lenders put rates up, sparking fears of an industry-wide increase.
Halifax, which is part of the 41% taxpayer-owned Lloyds Banking Group, is expected to increase the interest rate on its standard variable mortgages (SVR) from 3.5% to 3.99% from May 1.

The decision to raise rates will leave most of Halifax's 850,000 mortgage holders, those with an average of £67,500 debt outstanding, paying an extra £16.40 a month or £196.80 every year.

The effect will be worse for those on interest-only mortgages for whom repayments will go up by £27.56 a month or £330.72.

A source within the bank told Sky News that it wanted to give its customers "as much notice as possible" to help them prepare for the change.

Halifax has blamed the increasing cost of borrowing on the interbank markets from which retail banks source money to lend to customers.

On Friday, RBS announced a 0.25% increase for three of its mortgage products affecting 200,000 customers.

An RBS spokesman said: "Over the last year the cost of funds at which we need to borrow to fund our mortgage commitments has risen considerably.

"We have absorbed the cost during this period but have now decided to pass on some of this increase."

The move comes despite there being no change on the horizon to the Bank of England's ultra-low 0.5% base of interest.

Industry insiders fear that the increase will open the floodgates for other mortgage lenders to follow suit.