CML explains mortgage level increases

14 September 2007
Increases in mortgage costs are being caused by uncertainty in the capital markets which is feeding through into higher lending rates between banks, the Council of Mortgage Lenders (CML) has explained.

Despite the Bank of England's decision to keep interest rates on hold this month many mortgage lenders, including Abbey and Standard Life, are putting up their rates for consumers.

Michael Coogan of the CML told BBC One's 'Lunchtime News' that this is because the cost of wholesale funds for banks is rising as a result of the global credit crunch.

"If they use that money to lend money to borrowers that means they are going to change the pricing, so some customer pricing will go up," he remarked. "We have already started to see that continue over the last few weeks."

Homeowners on tracker mortgages will be the first to feel the effects of higher mortgage rates, although figures from Nationwide show that around 250,000 mortgage holders will see their fixed-rate deals come to an end between October and December.

The building society estimates that they could be facing increased monthly payments of as much as £200 thanks to the five interest rate hikes seen since August 2006.

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