UK’s mortgage market under pressure – hikes rates

Posted under General by Alan

Buckling under pressure due to the recent financial turmoil in the financial markets, the UK’s frozen mortgage market is seeking a hike in the mortgage rates. HSBC, the major High Street bank acted swiftly in raising its rates.

Both the mortgage costs and bank’s borrowing costs for wholesale funds have been showing a downward trend. The financial market crisis seems to be setting a trend in a negative direction.

As per the Bank of England figures, the average 2-year fixed-rate mortgage on 25% deposit deals has gone down to 6.08% in August from 6.6% prevailing at the end of June 2008. However, Libor (London Interbank Offered Rate), the rate of lending between two banks, has increased substantially and has reached its highest level above 6% since December 2007.

This has prompted many lenders to hike interest rates, while others were planning to revise it in the next few days.

HSBC is proposing to raise mortgage rate from 5.97 to 6.27% for deals with 10% deposit, while enticing borrowers with reduced rates on deals which offered 25% deposit. Yorkshire Building Society has already raised its rates by 0.4%

The news of rising rates has come at a time when it was estimated that a first time buyer could take 15 years on average to save a deposit which could help in fulfilling dream of owning a home in the UK.