Borrowers hit as HSBC and Barclays raise rates

Published 26th Sep 2008

Two of the UK's biggest banks increased the rates on some mortgage deals by up to 0.35 percentage points yesterday in a further blow to Britain's beleaguered homeowners.

HSBC and Woolwich, the lending arm of Barclays, blamed the rate rises on the spiralling cost of interbank lending. Two-year swap rates, which determine the cost of fixed-rate mortgages, has surged from 5.18 per cent to 5.56 per cent in the last week. Woolwich increased the rates on its fixed rate deals by up to 0.35 per cent while HSBC raised its rates for borrowers with a 10 per cent deposit by up to 0.3 per cent, adding £25 a month to mortgage bills for borrowers with a £150,000 homeloan. But the lender also trimmed rates for borrowers with heftier deposits of 25 per cent or more.

First Direct, HSBC's online arm, also increased the rates on its two most competitive deals. Skipton Building Society is also expected to announce rate rises on its fixed-rate deals in the coming days.

Experts said homeowners are being forced to bear the brunt of the uncertainty in financial markets as banks all-but cease lending to each other, forcing up the cost of mortgage funding, which is being passed onto borrowers.

The last two weeks has seen steep climbs in swap rates, the money markets that dictate the cost of fixed-rate lending. Two-year swaps have soared by up to 43 basis points in the last weeks and on Wednesday stood at 5.52 per cent.

Meanwhile the three-month Libor rate, which dictates the cost of short-term mortgage lending, was at its highest point since last December, at 6.20 per cent on Wednesday.

HSBC is raising its two, three and five year fixed-rate deals by 0.30 percentage points for home loans worth up to 90 per cent of a property’s value, adding £25 a month to a £150,000 mortgage.

First Direct is also raising the rates on two of its best-buy two-year deals launched only a fortnight ago by a fifth of a percentage point.

It’s market-leading two-year fixed-rate offset mortgage, which has a fee of £1,998, will rise from 4.99 per cent to 5.19 per cent.

Woolwich is raising rates by up to 0.35 percentage points on its three, five and ten year mortgages.

However, there was positive news for borrowers with sizeable deposits. Scottish Widows, owned by Lloyds TSB, said it was cutting rates by up to half a per cent on a number of mortgages covering up to 70 per cent of a property’s value.

The lender confirmed it had secured earlier funding and was using previous sources of liquidity.

HSBC also announced it was cutting fixed-rates on some deals for borrowers with larger deposits from 5.99 per cent to 5.79 per cent.

Source: ' times '

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