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Halifax and Abbey raise interest rates

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by Gill Montia

Halifax and Abbey have increased interest rates on their short-term fixed-rate mortgages.

The Halifax has upped rates on its two-year fixed and two-year tracker mortgages by 0.5% (in the case of the tracker the rise will apply to new customers only).

The UK’s largest mortgage lender has excused itself by saying that the cost of borrowing money on the wholesale money markets is above the Bank of England’s base rate, and has been for some time.

Halifax increased rates across a range of new mortgages earlier this month, although three, five and 10-year fixed-rates were not affected.

In the case of Abbey, the lender has increased the cost of its five-year fixed rate deals by up to 0.1%.

The bank has also withdrawn its 100% loans, in line with all bit a few niche lenders.

Both lenders have now passed on last week’s 0.25% cut in the base rate to existing customers on variable rate loans.

The Chancellor of the Exchequer, Alistair Darling, and Prime Minister Gordon Brown have recently been speaking sternly about the responsibility held by banks and building societies to pass on cuts in the base rate.

However, lenders say that the high cost of borrowing on the money markets makes this impossible, and that the Bank of England needs to be more supportive of UK banks.

They argue that this support would help restore confidence in the markets and bring down Libor, the rate at which banks lend to one another.

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News posted: April 17, 2008

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