One of the UK's largest banks, HSBC, today announced that it is raising some of its mortgage rates.
Although there have been a few months of falling mortgage rates, the recent turmoil in the financial markets has seen banks more and more reluctant to lend to each other. This is because, simply, they do not know who it is safe to lend to. Because of this, the rate that they want to earn when they lend, the interbank rate, has shot up to 6.2% from only 5.7% a week ago. And banks are also lending only for very short periods. Long-term loans between banks are just not happening.
The effect of all this is to push up the cost for banks, looking to borrow money to lend onto customers, which inevitably means that they will pass that cost onto the customer. And HSBC is the first to do so, and more will follow.
For example, for new customers HSBC is increasing their fixed-rate mortgages by 0.3% to 6.27% (for mortgages with a 10% deposit).
For the last 2 months the Bank of England figures show that the cost of the average 2 year fixed deal for borrowers putting a 25% deposit down, fell from 6.6% at the end of June to 6.08% at the end of August. It is likely that downward trend is beginning to be reversed.
Let us do all the work for you
