Abbey raises cost of fixed-rate mortgages again |
Abbey will tomorrow dash hopes that the mortgage crisis is over when it raises the cost of fixed-rate mortgages by 0.56 percentage points, blaming a sudden increase in the cost of inter-bank borrowing.
Only a week ago, the UK's third biggest lender, alongside Nationwide and Halifax, signaled that the worst could be over for homeowners when they began cutting some rates in response to a fall in swap rates - the money markets that determine fixed- rate lending. However, in recent days, swap rates have started to climb, following predictions that the Bank of England could increase the base rate next month because of its concerns about inflation.
Abbey raised the minimum deposit required for most borrowers from 5 per cent to 10 per cent of a property's value to reduce its exposure to the downturn in property prices. It also made it harder for homeowners to take out cheaper interest-only deals. Those who do not have at least 25 per cent equity will no longer be able to switch from capital repayment to interest only - a common way of reducing monthly outgoings for homeowners struggling with rising living costs.
Abbey said: "As a result of our strong position in the market, we were able to reduce fixed rates last week, but the market changes have required us to pass on these increases."
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Added on 28/05/2008 20:47:23
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