Mortgage rates rising rapidly

Mortgage broker, John Charcoal, is warning that mortgage costs are rising.

Spokesman, Ray Boulger, says: “Conditions in the mainstream mortgage market are now rapidly deteriorating at a frightening speed. Lenders are changing their pricing and/or their criteria at the fastest pace in living memory, and probably ever.”

Yesterday, Abbey, the UK’s second-largest mortgage lender, announced its second rate rise in eight days. The industry leader, Halifax, and Chelsea Building Society have also increased rates on some of their mortgages.

Other lenders are likely to follow suit, marking a fundamental change in policy because banks and building societies have traditionally followed changes in the Bank of England’s base rate, which yesterday was kept on hold at 5.25%.

For example, Abbey is increasing its two-year fixed deal from 5.67% to 5.89%, meaning borrowers taking out an average new home loan of £155,000 will have to find an additional £240 a year.

In the case of Halifax, the interest rate on a two-year fixed mortgage has increased from 5.67% to 5.77%. On its two-year tracker mortgage, the rate risen from 5.74%, to 5.99%.

Meanwhile the slide in house prices continues with figures from the Halifax showing that values dropped 0.3% in February, the fourth fall in six months.

Ed Stansfield of economic forecasting consultancy, Capital Economics, is predicting that the situation will deteriorate, saying: “We expect both economic growth and the labour market to show increasing signs of weakness. We also expect the next four or five months to bring evidence that the house price correction is gathering momentum.”

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