Lenders announce mortgage rate increases

British mortgage holders will feel the squeeze, as Nationwide, Northern Rock and Halifax all announced a rise in their base rates yesterday.

The rise comes as a direct response to the Bank of England’s decision last week to raise interest rates to 5.75 per cent – their highest level for six years.

The new rates for variable mortgage holders are now 7.75, 7.84 and 7.24 per cent respectively, with all three passing on the full 0.25 per cent increase to their customers.

These increases work out as £33 extra a month for a £200,000 loan. Mortgage holders coming off a two or three year short-term fixed rate deal in the next few months will feel the difference worst of all, with rates having stood at just 4-4.5 per cent when their fixed rate period commenced.

Mortgage holders could find the situation worsening still, with many economists predicting further rate rises by the end of the year.

The Consumer Price Index – the government’s inflation yardstick – stands at 2.5 per cent, according to most recent figures. The Bank of England, which uses interest rate rises to cool inflation, has a target of just two per cent.

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