Increase in mortgage rates to affect 2012 mortgage deals

Most borrowers searching for the best mortgages rates, will find themselves paying more for a mortgage from this month. Mortgage lenders are continuing to increase the rates charged on their mortgage products. Northern Rock, Nationwide, Clydesdale Bank, The Mortgage Works and Skipton Building Society have, in the past week raised the rates charged on their new mortgages. Brokers advise that the biggest rate increase will affect those wanting a tracker mortgage or short-term fixed-rate mortgage.

Mortgage increases come as George Osborne announced the government’s strategy for tackling the deficit had kept lending rates in check. The chancellor has warned that a one per cent rise in market interest rates would see the average family paying £1,000 per month for their mortgage. Mortgage rates have been steadily increasing despite low public borrowing costs and analysts now predict that they will continue to rise during 2012. This was backed up by the Bank of England’s Financial Stability Report which said that mortgage rates may rise significantly in 2012 as banks pass on higher wholesale funding costs.

Rate increases will mostly affect home owners wanting to re-mortgage or those taking out a new mortgage. However, some with standard variable rate mortgages will see their costs rise too, the Bank of Scotland for Intermediaries and The Mortgage Business, have increased their standard variable rate mortgages, from 4.84 per cent to 4.95 per cent. This increase will affect around 175,000 borrowers.

Not all mortgage rates have been rising though. Nationwide cut its 5 year fixed rate mortgage on loans of between 75 per cent and 85 per cent of a property’s value. Martyn Dyson, head of Nationwide, said that this cut would help those with a smaller deposit who are looking for a longer term fix.