Three major mortgage lenders yesterday increased their rates following jumps in wholesale funding costs.
Three major mortgage lenders yesterday increased their rates following jumps in wholesale funding costs.
HSBC and internet and telephone bank first direct both raised their rates by up to 0.3%, while Barclays' lending arm the Woolwich has increased its by up to 0.35%.
A jump of 0.3% will add £27.46 a month to a £150,000 mortgage, or £330 a year, a rise of 0.35% will add £32 a month and £385 a year.
The difference is even starker for people with a £250,000 home loan, with the rises adding between £45.77 and £53.45 to monthly repayments and £550 to £641 to annual ones.
First-time buyers are also likely to feel the pinch, with a rise of 0.3% adding £20 to monthly repayments on a typical first-time buyer mortgage of £110,000, costing them an extra £242 a year, while a rise of 0.35% would add £23.52 a month and £282 a year.
HSBC was first to announce it was raising its mortgage rates following the recent jump in wholesale funding costs but it also said it was reducing the cost of borrowing for people with at least a 25% deposit by 0.2%, shaving £18 a month off repayments on a £150,000 mortgage, saving homeowners £217 a year.
HSBC is also introducing a new loan to value tier of 75% on its fixed-rate range, and it is cutting rates on these deals by 0.2%.
The group justified the move by saying that swap rates, upon which fixed-rate mortgages are based, had risen sharply during the past week following the recent financial turmoil.
It added that mortgages for lower risk borrowers with larger deposits were cheaper to fund than those for people who did not have as much money to put down.
The group added that it was reducing arrangement fees for people borrowing 90% of their home's value from £799 to £499, while fees for people taking out a 75% loan to value ratio would be £999.
Following the change, which comes into force today, a two-year fixed rate mortgage for someone with a 10% deposit will cost 6.27%, while one for someone with a 25% deposit will cost just 5.79%.
Two-year swap rates have soared from 5.18% last week to 5.56% yesterday, while three-month Libor rates, upon which tracker mortgages are based, have increased from a recent low of 5.7% to 6.2%.
Last week specialist lender GE Money, which lends under the First National and iGroup brands, announced rises of up to 1.6%, while smaller players, such as Yorkshire Building Society, have also increased the cost of some deals.
The move by HSBC brings to an end the most prolonged period of falling mortgage rates since the credit crunch first struck. Rates had been steadily decreasing since the beginning of July in response to lower funding costs.
The trend helped the average cost of a two-year fixed-rate mortgage return to its pre-credit crunch level, as lenders again competed for business.
A renewed round of rising mortgage rates is likely to increase pressure on the struggling housing market.
There are also fears that the rate rises will be accompanied by a further tightening in lenders' lending criteria, making it harder for first-time buyers to get on to the property ladder.
