Tracker mortgages: Rates increased amid credit crunch
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Nationwide & Halifax increase mortgage rates
Friday, 28 Mar 2008 09:31
Mortgage lenders Nationwide and Halifax are both increasing interest rates on a number of their products, despite expectations of the Bank of England making further interest rate cuts.
Nationwide increased rates on its tracker products by between 0.51 and 0.57 per cent – pushing costs of some mortgages above seven per cent.
Following suit if.com, part of the Halifax bank, increased rates on its products by up to 0.5 per cent.
The changes are likely to make it more difficult still for homebuyers to take their first steps onto, or move up, the housing ladder for those with little equity behind them.
Figures from the British Bankers Association (BBA) show approvals for house purchase are already near record lows – a clear sign the market is slowing.
The number of loans for house purchases issued in February edged up to 43,870, up from 43,732 in the previous month – however, levels were still down a third on a year ago.
Gross mortgage lending also fell slightly, down to £17.9bn in February.
The vast majority of this, however, was accounted for by remortgages.
In further bad news for borrowers, internet lender First Direct – a division of HSBC – announced it was withdrawing its 4.75 per cent two-year tracker deal at midnight last night.
The deal will be replaced with a 4.95 per cent mortgage offering.
Commenting on the changes Howard Archer, the chief UK economist at Global Insight, said yesterday's news showed that there was still a high risk of a full-scale housing crash in the UK.
"Housing demand will be hit by fewer and more expensive mortgages being available," said Mr Archer.
"Furthermore, there is a growing danger the UK economy will suffer recession, or extended weak growth, and that unemployment will increase significantly.
"This would be liable to lead to a marked increase in the number of people having to sell houses for distressed reasons, particularly given the extent to which many households have had to stretch themselves to the limit to buy a house."