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Mortgage rate rises warning

Fri, 12 Jan 2007

Following the shock decision by the Bank of England Monetary Policy Committee to raise base interest rates yesterday, one mortgage lender has warned of an immediate increase in mortgage rates .

According to Victoria Mortgages, lenders on the high street will pass on the rate increase to borrowers as soon as possible. Whilst in the past some banks and building societies have been slower to pass on rate rises, the current trend of rising interest rates means that the usual methods lenders use to fund their loans are becoming stretched. To protect their profit margins, lenders will pass on rate increases.

The chief executive of Victoria Mortgages, Kevin Hillgren, said: "Continuing house price inflation, robust levels of mortgage originations and reasonably strong retail spending over the holidays led the wholesale funding markets to anticipate today’s interest rate increase by the Bank of England. The term swap markets more than fully priced in a quarter point rise in interest rates, as the rates for three year swaps increased from 5.20% in early December to yesterday’s levels of over 5.50%."

The head of business development at Victoria, Simon Read, said: "We are already beginning to see evidence of an increase in rates as several lenders have announced they will shortly be ‘withdrawing’ their product ranges – which is the first step lenders take before any repricing. Our advice to intermediaries is to ensure that any client thinking of refinancing soon should look to make more immediate plans before the existing low rates are gone."
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