Mortgage

Mortgage rise hits millions: More bad news for homeowners as Halifax becomes latest bank to raise home loan rates

RBS-Natwest group pushing rates from 3.75% to 4%
Halifax follows suit after announcment of 0.49% home loan rise this morning
Increases come despite the Bank of England holding base rates at 0.5%
Hard-pressed families already hit by petrol price at all-time high


Millions of families face rising mortgage interest rates that will add £300 a year to the cost of a £100,000 home loan.

The RBS-NatWest group is pushing up rates from 3.75 per cent to 4 per cent while Halifax, one of Britain's biggest lenders, followed suit by pushing its own home loan rate up from 3.5 per cent to 3.99 per cent.

The increases come despite the Bank of England maintaining its base rate at just 0.5 per cent and will be met with fury by homeowners, who will see the moves as rank profiteering.

The rise by Halifax will affect around 850,000 households by driving up repayments on a £100,000 mortgage by £24.31 a month or just under £300 a year.

Yesterday it emerged that the RBS-NatWest group, which is 80 per cent owned by the taxpayer, is increasing the rate charged to 200,000 of its customers to 4 per cent.

Other banks and building societies could now follow suit. Halifax is part of the giant Lloyds group, which also includes the Lloyds-TSB and Cheltenham & Gloucester brands.

The increases could not come at a worse time for hard-pressed families, who are struggling to make ends meet.

Just yesterday the price of petrol hit an all-time high, threatening to reverse recent falls in the headline rate of inflation.

The rate rises also amount to a significant slap in the face to taxpayers who supported banks such as Halifax through the banking crisis of 2008 but who are now suffering cuts, austerity and job losses.

Accusations of profiteering will be bolstered by official figures published earlier this week that revealed how the big banks have dramatically pushed up their profit margins on credit cards, overdrafts and other products.

At the same time, the Bank of England has kept its base rate at a record 300-year low and has also, since 2009, poured a staggering £375billion of cheap money into the banking system through so-called quantitative easing.

Sources close to the banks involved, however, claimed that the prices they are being charged to borrow money on the wholesale markets have risen in the past year and they have no choice but to pass the increase on to customers.

One insider said: ‘The change acknowledges that the cost of funding a mortgage in today’s market has risen.

‘The increase to the rate reflects the fact that raising money through retail savings and in the wholesale markets is currently very expensive.’

Following the Halifax rise – which will take effect from May 1 – a customer with a £100,000 mortgage would see monthly repayments rise from £714.88 to £739.19.

The Consumer Credit Counselling Service said: ‘Households are being hit by a double whammy.

‘High interest rates and the squeeze on household budgets across the board are combining to make it even harder for people to repay their debts, and many are at risk of falling even further behind.’

Marc Gander, of campaigners the Consumer Action Group, said: ‘If consumers think that banks are suffering alongside them in this economic crisis, they really do not understand what is going on

The higher rates come just days after Britain’s big five banks – HSBC, Santander, Barclays, Lloyds and RBS –finished revealing their financial results for last year.

Overall, the five made profits of £10.7billion from their high-street banking operations, excluding the cost of compensation to their payment protection insurance victims.

John Mann, a senior Labour MP on the Treasury select committee, described any rate rises as an ‘outrage’ considering the money Halifax took when it was bailed out by the taxpayer.

He said: ‘They take taxpayer money in the form of a bail-out and then take their money again through their mortgages – it is totally unfair.’

RBS has announced its increase, to take effect on May 1, on RBS and NatWest-branded offset mortgages.

The same change will apply to its ‘One Account’ range, which includes Virgin One, DirectLine One and NatWest One.

It blamed the increase on the higher cost of wholesale borrowing, which it had now decided to ‘pass on’.


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