Lloyds TSB raises mortgage rates

Lloyds TSB and its Cheltenham & Gloucester subsidiary have increased rates on two and three-year fixed-rate loans by up to 0.26%.

The bank’s two-year fixed-rate deal for those with a 75% deposit has risen to 6.44%; borrowers with only 10% of equity will pay 6.75%.

Last week, Halifax, the UK’s biggest mortgage lender and part of the HBOS group which is in the process of merging with Lloyds TSB, raised rates across its mortgage range by up to 0.49%.

HSBC and Yorkshire Building Society have also increased the cost of their home loans and other lenders are expected to follow suit.

All the lenders to have acted so far are blaming a sharp rise in wholesale borrowing costs for their actions.

Mortgage rates had been decreasing on an almost weekly basis since July, when two-year fixed-rates peaked at an average 7.08%.

However, the turmoil on Wall Street which began with the collapse of Lehman Brothers has forced up market swap rates, which determine fixed mortgage rates.

Meanwhile, Libor, the rate at which banks lend to one another, has continued to rise despite positive news from the US on the proposed bail-out of the country’s banks.

Analysts are predicting that the average interest rate on the popular two-year fixed-rate deal will return to the ten-year high seen this summer in the weeks ahead.

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