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Friday 27th of March 2009
March 24, 2009

Mortgage interest rates could rise steeply


by Peter Charalambous
 Mortgage interest rates are unlikely to fall with a 9% rate likely

Lord Turner, the Financial Service Authority’s chairman, has said that as a result of increased regulatory control consumers are likely to face higher mortgage rates as costs are passed on.

The FSA is now considering a number of new measures in order to avert any future banking crisis.

The primary consideration is looking to increase the amount of money banks and mortgage lenders must hold in reserve prior to lending.

Within the report there is an indication that mortgage rates may be high for the next 6 to 9 years as a direct result of the current banking crisis.

By holding more capital it may have prevented the fall of Northern Rock, Bradford & Bingley and Halifax Bank of Scotland, yet the cost of holding capital will be eventually passes on to the consumer.

Another worrying sign is the increase in mortgages that is currently occurring as Lloyds TSB, which is part owned by the tax payer, has introduced a fixed-rate deal with a rate of 4.89 per cent requiring a 40 percent deposit - which is 1 percent higher than Abbey, which did not receive taxpayers money.

Longer term fixed mortgages are seemingly a beneficial option, but many analysts are describing them as a short term fix for lenders.

  • Eurozone interest rates rise
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  • Mortgage interest payments rise to 20.6% of incomes
  • Mortgage rates rise in market turmoil
  • Lenders demand rise in Income Support for Mortgage Interest
  • Difference between Bank of England interest rate, loan interest rates narrows
  • ECB raises interest rates; BofE holds rates firm
  • Bernanke says US rates may rise more
  • Interest only mortgagers face 70% rise in payments
  • Discuss this in the Finance Markets forums

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