Halifax raises mortgage rate

Halifax Building Society, the largest mortgage lender in the UK, finally raised its standard variable mortgage rate to 7.25 per cent yesterday, two weeks after its rivals acted on the quarter percentage point rise in base rates announced in October.

The move will allow the society to raise its savings rates in the new year when competition to woo savers is expected to hot up when several leading building societies plan to convert to banks, unleashing a pounds 17bn windfall for investors.

Alliance & Leicester was the first of the big societies to increase mortgage rates earlier this month. But Halifax decided to hold off until this week's monthly meeting between the Chancellor of the Exchequer and the Governor of the Bank of England before instigating its first rate rise since February 1995.

The move comes amid growing evidence that the housing market is staging a recovery and shows the need to increase the rates on offer to savers, who have lost out in the race among building societies and banks to win mortgage business.

"We always have to balance the interests of our borrowers and savers whilst continuing to remain competitive in the market. The recovery in the housing market continues and over the last two years borrowers have benefited from low interest rates and low mortgage payments," said Mike Blackburn, chief executive of Halifax.

The rate rise by Halifax allowed Nationwide, the largest remaining building society, to yesterday increase its standard variable mortgage rates by a quarter of a point to 6.99 per cent - which is still a quarter of a point below that offered by the large lenders.