HSBC and Yorkshire BS increase mortgage rates

| September 25, 2008 | 0 Comments
HSBC and Yorkshire BS increase mortgage rates

Predictions that mortgage interest rates would rise in response to last week’s events on Wall Street are being fulfilled sooner rather than later.

HSBC is increasing rates by 0.3% for borrowers with small deposits; interest on a two-year fixed-rate loan for a borrower with a 10% deposit will rise to 6.27% from tomorrow. However, for customers with a 25% deposit the rate goes down to 5.79%.

Earlier this week, Yorkshire Building Society increased rates by up to 0.4% and other lenders are expected to follow suit.

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

By early September, the average was down to 6.39%, with further cuts anticipated.

However, market swap rates, which determine fixed mortgage rates, have risen sharply during the past week in response to the turmoil on Wall Street.

(The direction taken by swap rates reflects traders’ predictions of future movements in money markets interest rates.)

Meanwhile, Libor, the rate at which banks lend to one another, has surged to levels last seen in December of 2007.

Bank are scrambling for cash as the wholesale lending markets freeze up once again, awaiting confirmation that the $700 billion rescue package proposed by the US Treasury and Federal Reserve will not founder in political argument.

Fears that it could fail have left banks extremely nervous of lending to one another.

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