Lenders split on increases in home loan rates: Competition for savings will be crucial, Vivien Goldsmith reports
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Your support makes all the difference.MONDAY'S base rate rise has given interest rates a new direction - up.
Two of the largest mortgage lenders moved swiftly to raise rates - Abbey National by 0.35 percentage points to 8.09 per cent and Nationwide by 0.4 to 8.14 per cent.
This will increase the monthly cost of a pounds 50,000 interest-only loan by about pounds 14 - still nearly pounds 250 below the peak in 1990.
There is little enthusiasm for higher home loan rates, for fear of spooking an already depressed housing market.
Many lenders are waiting to see what Halifax, the largest lender, does. It is likely to announce its new rates next week.
David Gilchrist, general manager, said: 'We wanted time to digest the impact on the housing market. We have to be fair to everybody. Savings are mobile and we have to remain competitive.'
What happens to savings is the key to changes in the mortgage rate. If competition is fierce, no lender will be able to resist increasing rates to compete and, beyond a tiny move, the mortgage rate will surely follow.
All the societies will be watching National Savings, which can speedily drain societies' coffers with tempting rates. It is running ahead of its target for this financial year of raising pounds 3.5bn for the Treasury. But it will not necessarily hold back, and could make a pre-emptive strike.
Woolwich Building Society has been firmest in resisting a rate rise. 'It is not our intention to raise rates,' said a spokesman.
Alliance & Leicester is also reluctant to increase rates. Richard Pym, finance director, promised that rates would not rise on 1 October - the expected date for most societies to move.
'We will leave any increase to a later stage. Our savings rates are already competitive. We will be watching both sides carefully.'
Cheltenham & Gloucester, Birmingham Midshires and Bradford Bingley are among societies likely to make an announcement soon so that rates can rise on 1 October.
Northern Rock has already increased its basic rate from 7.74 to 8.14 per cent, but the discounts - as high as 5.65 per cent - are still in place. Savings rates will rise on 3 October by 0.1 to 0.4 percentage points - with the larger rises going to the higher tiers.
Some fixed-rate loans are still available from the pre- rise era. Britannia Building Society will have its five-year fix at 8.15 per cent available for no more than a week.
'Grab it as fast as you can,' said Ian Darby marketing director of John Charcol, the mortgage broker.
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