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Mortgages -
More Trouble As For Borrowers Banks Raise Rates - 11/04/2008
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As banks raise their interest rates once again, millions of people in the UK who are already struggling with debt will be hit by higher mortgage repayments.
Reports said four of the banks ignored cutting down on mortgage cost and increased charges on a range of loans by adding up to £150 a month to a typical mortgage.
Within two weeks, Nationwide – the second biggest lender – raised the rates on its fixed-rate deals for the second time.
Royal Bank of Scotland, Allaince & Leicester and Britannia were also said to have increased rates.
This development has led to speculations that other banks and building societies may follow in the same direction. Mortgage Brokers, according to reports, believe that other lenders would follow suit, thereby creating more problems for the 1.4 million borrowers whose fixed-rate mortgage deals will come to an this year.
Director of Savills Private Finance, Melanie Bien argued that the connection between interest rates and mortgage rates is considerably weakened.
She added further that rates on mortgage deals may not come down in spite of the cut in base rate. “In fact, lenders are moving in the other direction, with several raising their fixed rates in the past couple of days. Unfortunately we expect this to continue,” said she.
Commercial lending market that used to fund cheap mortgage deals has now shrunk as credit crisis continues to hit banks in the UK. Sub-prime mortgage lending has been particularly axed with lenders turning away customers who don’t have excellent credit rating.
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