Halifax defies Brown and raises new lending rates

Published on Wednesday 16 April 2008 22:10

HOMEOWNERS were dealt a fresh blow yesterday as Britain's biggest lender hiked mortgage rates, defying the pleas from Gordon Brown to pass on the rate cut offered by the Bank of England.

Halifax, which lends to a quarter of mortgage borrowers in the UK, raised its rates on two-year fixed and tracker deals by 0.5 per cent if taken out through a broker. Rates for a mortgage taken out with Halifax directly are being raised by an average of 0.35 per cent.

House prices in Scotland have risen 180 per cent in a decade, and it is now 65 per cent harder for first-time buyers to buy a property, according to research published by the homeless charity, Shelter.

The news came despite the Prime Minister asking banking chiefs at a No 10 summit on Tuesday to work with him to ease the credit conditions and to pass on rate cuts.

The Bank of England last week cut interest rates but high-street lenders still insist that their costs for borrowing are too high to pass on savings to customers.

A spokeswoman for Halifax said: "The pricing for the two-year fixed and tracker mortgages has increased significantly across the industry because of the cost of funding in the money markets.

First-time buyers have seen their mortgage options dramatically narrow, particularly if they do not have a hefty deposit.

Archie Stoddart, director of Shelter Scotland, said: "Any fall in prices would be a drop in the ocean for those looking to buy in Scotland after an almost 180 per cent rise in prices over the last ten years.

The reality for many first-time buyers is that as mortgage lenders tighten their belts, it will become increasingly difficult to buy."

Shelter's "Roof Affordability Index" shows that in Scotland, while the average weekly income of working households has risen from 548 in 1997 to 851 now – up 55 per cent – the average first-time buyer property has rocketed from 38,845 ten years ago to 108,446.

Mortgage repayment costs now swallow up 15.2 per cent of the average household's income, compared with 9.2 per cent in 1997 and fees for the best deals have also nearly doubled during the past year.