Downturn sees Lloyds raise rates

Lloyds TSB has joined a host of other lenders in announcing a hike in the cost of its mortgage rates.

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The group, which also lends under its Cheltenham & Gloucester brand, is increasing the cost of its two and three-year fixed-rate mortgages by up to 0.26%.

Last week, Halifax, one of Britain's biggest mortgage lenders, announced that it was raising the cost of its deals by up to 0.45%.

The group, which is being taken over by Lloyds TSB, blamed the move on the recent global financial turmoil.

It also said it would no longer offer 95% mortgages through brokers, although it would continue to lend this amount through deals taken out directly with the bank.

The changes leave Halifax's and Lloyds TSB's two-year fixed-rate mortgage for someone borrowing 75% of their home's value at almost the same level.

Lloyds TSB is offering a rate of 5.94% with an arrangement fee of £995 for one of the loans, while Halifax is offering 5.95% and a fee of £999.

One of the key inter-bank borrowing rates, three-month Libor rate, which affects the pricing of tracker mortgages, has soared from a recent low of 5.7% to nearly 6.28% on Friday - the highest level since December last year, and the biggest differential to the Bank of England base rate since September 2007.

Copyright © PA Business 2008

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