Abbey raises mortgage rates
October 6, 2007
High street lender Abbey has become the first of the high street banks to raise its mortgage interest rates, blaming the decision on the turmoil that has hit the financial markets as a result of the credit crunch that has spread from the sub-prime sector of the United States.
According to officials from the Abbey, it is ‘market pressures’ that have resulted in its decision to raise interest rates on tracker mortgages by between 0.1% and 0.2% for new customers.
The problems within the mortgage and financial markets have already taken their toll with other lenders. Victoria Mortgages has recently announced that it is going into administration due to escalating costs. Northern Rock states that it remains solvent but has seen its share prices drop by 24% as a result of having to ask for emergency funding from the Bank of England. And some lenders, such as Abbey, have looked at raising interest rates, or in some cases taking certain mortgage products off the market.
The head of mortgages at the Abbey stated: “These changes reflect moves in the market that have been experienced. We expect that these current trends will be sustained over a significant period and that other companies will follow immediately.”
Standard Life has also now followed suit, and one official from Standard Life stated: “We have seen significant changes to the money markets in the last few months and this has increased the cost of borrowing internationally.”
Other high street banks are expected to quickly follow suit and raise mortgage lending rates even further. Buyers area already struggling to afford mortgages as a result of the five interest rate rises that have already been applied to the base rate by the Bank of England over the past year.
Alan Wright
6th October 2007
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