UK Money News
11th April 2008
Mortgages more costly despite rate cut
Two of the UK's largest mortgage lenders have raised repayment rates on their fixed rate deals, despite yesterday's rate cut from the Bank of England.
The monetary policy committee (MPC), which sets the bank rate, yesterday trimmed the key base rate of interest by 0.25 per cent to five per cent.
However, in spite of the reduction, Nationwide has announced that it will be passing on increases of between 12 and 32 basis points on its fixes.
Meanwhile, Alliance & Leicester confirmed an increase on its fixed rate products of between 20-30 basis points - bringing its two-year fixed rate mortgage to 6.24 per cent from 5.94 per cent.
The news has provoked an angry response from MPs and consumer groups, with Ann Robinson of price comparison site uSwitch accusing the banks of curbing the potential for confidence to be restored to consumers and to the property market.
She said: "Many lenders are yet to pass on the recent base rate reductions. Instead they are busy increasing rates, demanding larger deposits, tightening lending criteria and, in some cases, withdrawing deals from the market.
"By refusing to pass on rate reductions and taking extreme measures to reduce business volumes, lenders are fuelling the current lack of confidence in the property market."
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