Lenders 'raising cost of fixed-rate mortgages'

Date:Wednesday 17th June 2009
Author: Max Freedman

A number of UK lenders are raising the costs of their fixed-rate mortgages.

For example, Cheltenham & Gloucester has increased the interest it charges on its most popular fixed-rate deals by 0.7 per cent.

In addition, Halifax fixed-rate mortgages have gone up by between 0.3 per cent and 0.6 per cent.

However, for borrowers with deposits of 40 per cent, the bank is reducing its two-year tracker mortgage by 0.2 per cent.

Other lenders to announce increases in fixed-rate mortgage costs recently were Abbey and Alliance & Leicester.

According to a report in the Times, most other lenders are expected to follow suit.

Commenting on the issue, Ray Boulger, senior technical manager at John Charcol, said: "A key reason for lenders to increase rates is to deter business. When one lender increases rates, business goes to other lenders until those lenders hike rates as well."

He added that the lack of capacity in the market is forcing lenders to control the flow of applications they receive.

Recently, Mr Boulger said that a recent increase in swap rates would also cause banks to raise the cost of fixed-rate products.