Eurozone crisis could push up mortgage cost
Brokers have noticed a rising trend on mortgage rates and are blaming it on the current crisis in the eurozone.
Woolwich, Halifax and Santander, Nationwide, ING and the Chelsea Building Society have all increased tracker mortgage rates recently, reversing this summer’s trend for rates to become more competitive.
The Chelsea Building Society has increased the cost of some tracker mortgages by 0.2 per cent, the Halifax has increased the rate of its two-year tracker by 0.15 per cent and the Woolwich has introduced a 0.4 per cent increase in the rate its trackers revert to after two years.
The eurozone crisis has caused the average interest rate that top London banks charge when lending to other banks, a rate known as ‘Libor’, to rise from 0.83% to 1% since August.
This reflects a fall in banks’ confidence about lending to each other, and as many lenders rely on borrowing to fund mortgages, there is a clear link between Libor and mortgage price.
Analysts are concerned that if the eurozone crisis worsens the availability of mortgages could fall, with a potentially serious effect on the housing market and the wider economy.
Given the current uncertainty in the Eurozone, it seems unlikely that rates for borrowers will fall in the short term.
There was some good news in the Eurozone this morning, with financial markets calming after the cost of borrowing in Italy from a record high level.
The FTSE 100 Index gained 46.6 points and similar gains were seen in Germany in France.
Italy is poised to establish a new national unity government, and the possibility of respected EU Competition Commissioner Mario Monti taking charge has helped to soothe market fears.
The appointment of Lucas Papademo as Greece’s new Prime Minister, and his promise to keep the country in the euro, has also helped to allay fears.