Abbey hikes fixed-rates after last week’s cut

Abbey has increased some mortgage interest rates, after making cuts only last week. The Spanish-owned bank is raising rates on its fixed-rate loans by up to 0.56%.

Short-term fixed-rate borrowers will see the biggest rise, with a typical three-year fix now offered at 6.49%, increasing repayments on a £150,000 loan by £52 a month.

For a five-year fixed rate deal at 75% loan-to-value, the increase is 0.44%, to 6.19%.

Only last week, Abbey, Halifax and Nationwide cut interest rates on some fixed-rate deals, leading to a surge of optimism about the UK mortgage market.

However, Abbey says that the cost of wholesale funds have risen sharply.

Fixed-rate mortgages are determined by market swap rates and these have risen in response to the Bank of England’s latest inflation report, which warned that inflation could hit 3.8% by the end of 2008.

Swap rates move with interest rate expectations and the bank’s prediction makes further cuts in the base rate unlikely this year.

Abbey has seen strong growth in its mortgage business in recent months. Its market share trebled to almost 16% in the three months to the end of March.

Discuss this in the Finance Markets forums

Story link: Abbey hikes fixed-rates after last week’s cut