According to a recent article in the Times, the country's biggest mortgage lender is set to increase its interest rate for many borrowers and remortgagers. Halifax, which has one fifth of the mortgage market in Britain, has withdrawn a large part of its mortgage range and will increase the rate on some of its variable trackers by between 0.1 and 0.2 percentage points.
This all stems from chaos in the money markets in the US where mortgage lenders face being unable to recover billions of dollars lent out to low-paid workers. This has had a knock on effect over here (most notably with Northern Rock asking the Bank of England for financial assistance) and many analysts now believe that house prices are actually falling. A recent survey by the RICS (Royal Institution of Chartered Surveyors) suggested that property prices across the country are falling for the first time since October 2005.
So home owners are facing a double whammy of increased mortgage payments and a fall in the value of their homes. The fact that other mortgage lenders will undoubtedly follow suit, brings more misery for borrowers who have already faced five rises in the base rate since last August. Abbey, the second biggest mortgage lender, has already raised the interest rate on its variable tracker loans by up to 0.2 percent. Although the Bank of England have signalled that they are not about to raise the base rate again at present, there was no comfort in a statement from Mervyn King (the Governor of the Bank of England) when he stated that "effective borrowing rates facing households and companies will rise somewhat."
(The Times 13/09/07)