Millions of home loan borrowers in the UK face the prospect of higher interest rates
Cheltenham & Gloucester, part of Lloyds TSB, and the UK’s second largest mortgage lender, Nationwide, both took steps last week to avoid being inundated by applications. The two lenders increased their rates on some products to make them ‘less attractive’.
In fact, lenders that depend more heavily on the money markets for funding new mortgages unexpectedly pulled two-year fixed rate mortgage deals and have opted to hike rates owing to the increasing cost of wholesale funding.
As a result, millions of home loan borrowers in the UK now face the prospect of higher interest rates as banks now choose to pass on higher wholesale funding costs.
Reflecting the market trend, First Direct has been swamped by applications since it began offering its two-year fixed rate mortgage deals pegged at 4.95 per cent – considered to be one of the most competitive deals in the market. Applications to First Direct have increased in recent weeks. A market analyst mentioned: “This is one way of limiting applications. Some building societies have been stopping applications geographically whereas others have been opting to restrict them by asking borrowers to put down a certain deposit.”