Mortgage charges are still rising

The credit crunch has led some big mortgage lenders to announce another round of price rises for new customers.

Cheltenham & Gloucester has put up its fixed rate deals by up to 0.6%, and raised its tracker rates by up to 0.4%.

And Abbey, the UK’s third biggest lender, is levying higher initial fees and demanding larger deposits for some of its key deals.

Lenders are continuing to ration their funds for new customers as a result of the credit squeeze.

Most banks and building societies, however, have cut their standard variable rates in line with recent interest rate cuts by the Bank of England.

Tracker rates

Abbey has reduced the interest rate on its two-year tracker deal from 6.37% to 6.12% but is now asking for a minimum 25% deposit instead of the usual 10%.

Some of its two-year fixed mortgages are now also priced at slightly lower interest rates, but now require either higher set-up fees of £999, and in some cases 30% deposits instead of 20%.

Britannia building society has raised all of its interest rates by up to 0.75% for new customers.

The increase across the whole range of its mortgages means that the building society’s cheapest two-year fixed rate - one of the most popular types of deal among new borrowers - is now priced at a minimum of 7.29%.

The crisis in the mortgage market, with lenders being deprived of funds by the credit crunch, has seen lenders change their deals almost weekly.

Since the start of the year Abbey has revamped its mortgage range 11 times, Britannia eight times, and Cheltenham & Gloucester has done so on 15 occasions.

In most cases this has meant putting up the cost of borrowing by changing interest rates, raising the minimum deposit, restricting income multiples or charging higher set-up fees.

The existing mortgage customers of all lenders who are benefiting most from cheaper loans are those whose deals tied directly to the Bank of England’s base rate.

It has cut the cost of borrowing three times since December.

According to the financial information service Moneyfacts: “35% of existing borrowers are on variable tracker rate mortgages, they will have seen rates drop by 0.50% in the last three months.”