Barclays to put up the cost of fixed-rate mortgages

Published 17th Apr 2009

Sixth biggest lender will scrap popular deal and hike longer-term fixes tomorrow by up to 0.4 per cent
James Charles

Barclays is set to increase the cost of fixed-rate mortgages despite the Bank of England leaving interest rates unchanged this month.

The move suggests that the mortgage market has bottomed out. Other lenders are expected to follow suit in the coming weeks.

The lender is pulling a market-leading 3.99 per cent four-year fixed-rate deal for borrowers with a 40 per cent deposit, from tomorrow. It is also increasing the costs of its three- and five-year fixes by up to 0.4 percentage points.

Woolwich, the mortgage arm of Barclays, blamed the decision on a rise in the cost of longer-term wholesale borrowing, which banks use to fund new mortgage lending. Market rates have increased from 3.12 per cent to 3.17 per cent in the past three weeks.

The bank is the first big lender to increase rates since the cost of borrowing hit a historically low level at the beginning of February. Brokers see this as evidence that mortgage rates have no further to fall and are urging homeowners to take out longer-term fixes to protect against rising interest rates over the next few years.

Mortgage lending remains at record lows as banks and building societies fear the effects of the worsening economy and the recession in the housing market.

Source: ' times '

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