Lender kicks off rate hikes run

Published:
25 September 2008
Topic:
News,Money,Mortgages

A jump in wholesale funding costs has led HSBC to announce a hike in its mortgage rates.

The lender explained the move was because recent economic turmoil had caused a rise in swap rates - upon which fixed-rate mortgages are based.

The group said this means it is increasing its fixed-rate deals for borrowers with just a 10% deposit by 0.3%.

It is also introducing a new loan-to-value tier of 75% on its fixed-rate range, and it is cutting rates on these deals by 0.2%. It added that mortgages for lower risk borrowers with larger deposits were cheaper to fund than those for people who did not have as much money to put down.

But the group said it was reducing arrangement fees for people borrowing 90% of their home's value from £799 to £499, while fees for people taking out a 75% loan-to-value ratio would be £999.

Following the change, a two-year fixed rate mortgage for someone with a 10% deposit will cost 6.27%, while one for someone with a 25% deposit will cost just 5.79%.

HSBC is the first of the major lenders to increase its rates, but other groups are expected to follow suit in the coming days.

Copyright © PA Business 2008

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