A high street provider is increasing the cost of its deals despite widespread estimations that the Bank of England will cut interest rates this week.

The Woolwich, which is part of the Barclays branch, is raising the rates on some of its mortgages by up to 0.3%.

This decision comes despite interest rates being just 1%, with analysis’s predicting that they will be cut to 0.5% by the end of this week.

The mortgage increase is yet another blow to home owners who are struggling to find affordable mortgages amid the financial meltdown.

In response, Barclays blamed the increase in the wholesale cost of funding and unprecedented level of demand for its mortgages. However, experts disagreed, stating the rise is due to the bank not having the money to lend.

Paul Welch, a managing director of a mortgage broker firm, said: "I am surprised that Woolwich has increased its three and five year fixed rates by 0.3 percentage points when swaps are only marginally higher.

"Using swap rates to justify their increase is poor and is more about controlling the amount of money they want to lend right now by pricing themselves out of the market."

The Bank of England has noted that further action is needed to help lift the economy out of recession and is considering printing more money to inject into the economy.