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Mortgage lenders hit property investment with rate hike

Three UK high street mortgage lenders have upped the costs of their fixed-rate home loans. Bradford & Bingley, First Direct and the Co-operative bank stepped up fees on Wednesday as banks continue to find it harder to lend.

The move may hits property investors letting property while others will have been deterred from buying thanks to the increases.

The Co-op hiked its three-year fixed rate by 0.7 per cent and its five-year rate by 0.9 per cent. Bradford and Bingley increased its fixed rates by between 0.5 per cent and 0.7 per cent while internet and phone bank First Direct moved its two-year fix to 6.15 per cent, up 0.16 per cent.

Finance Markets reports HM Revenue and Customs recently said the number of house sales in the UK fell by 13 per cent in May compared with April.

And on Thursday Moneyfacts reported the average rate for two-year fixed rate mortgages has now broken the seven per cent mark. Moneyfacts mortgage experrt Darren Cook said:

“As the rates on offer increase, so does the relative risk. More and more borrowers are likely to find the increased repayment too much to bear.”

“However, it seems not all is lost as there could be some light at the end of the tunnel for borrowers. Today, swap rates have decreased from its 6.52 per cent high last week, by 0.16 per cent to 6.36 per cent.”

He added the firm hoped this downturn was not “short-lived” and that lenders will play a “fair game” by reflecting the decrease in the rates they offer over the next few weeks.

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