Big five jump gun on mortgages

THE five major mortgage companies have put up the cost of fixed-rate deals, despite the decision by the Bank of England to stand still on interest rates.

The Bank's base rate is at a 48-year low of 3.5%. However, the Halifax, Abbey National, Woolwich, Cheltenham & Gloucester and Nationwide have increased costs for new borrowers.

The Halifax has pushed up its rate on a five-year fixed deal by 0.8% in two stages to 4.79%. A borrower with a £100,000 loan will have to pay around £900 more a year and £4,500 extra over the term.

Abbey National has implemented two increases, taking the rate up from 3.99% to 4.69%. The rise at Woolwich is from 3.99% to 4.39%. Meanwhile, Cheltenham & Gloucester withdrew its 4.29% offer and will announce higher rates next week. The Nationwide put up the price of its five-year deal by 0.5% to 4.59%.

Ray Boulger, of mortgage advisers Charcol, said: 'These new rates are poor value and people would be wise to steer clear of them. The best deal from the Halifax will be 4.79%. But they have some even more expensive five-year fixed deals which charge about 5.5%, which is ridiculously expensive.'

However, he came to the defence of the institutions, saying there was not a direct correlation between base rates and fixed-rate mortgages.

'They are priced on the back of long-term international money market rates,' he said. 'These rates often move differently to base rates.'

A Halifax spokesman said: 'There is no rip-off or profit-taking here. We are simply passing on the extra cost of borrowing this money.'

Barry Naisbitt, an economist at the Abbey National, said the bank was passing on rises in market rates. 'We can't say if this will the first of several rate hikes.' he said.

Cheap five-year fixed deals are available from smaller lenders, such as the Scarborough and Leeds & Holbeck, but are disappearing fast.