Lenders put up mortgage costs after rate rise

Mortgage lenders began putting up the cost of borrowing today in response to the latest move by the Bank of England on interest rates.

Among the first off the blocks was Cheltenham & Gloucester, Lloyds TSB's mortgage arm, which announced a quarter-point rise in its standard variable rate to 7.75%.

The increase will hit new customers from Monday, with existing homeowners affected from August 1, the lender confirmed.

The move will mean households with a typical £100,000 home loan will see a hike in their monthly repayment bill of around £16.

Lloyds TSB said it is yet to make a decision on its savings accounts.

Cheltenham & Gloucester was joined by Heritable Bank and Britannia Building Society in making an early move following the decision by policymakers to move the base rate to 5.75%.

Both lenders announced an increase of 0.25% in their standard variable rate in line with the Bank of England.

Homeowners have now been hit with five interest rate rises in the last 12 months.

For those on a £100,000 mortgage this will mean repayments on a £100,000 loan will have gone up by £80.12 a month since last summer, to £755.32.

Those more heavily in debt, with a £200,000 mortgage, are likely to see monthly repayments increase by around £33 as a result of yesterday's decision - taking the annual increase up to £160.

Other lenders are expected to announce an increase in their rates in the coming days.

Ray Boulger, senior technical manager at mortgage broker John Charcol, said: "The majority of lenders, around 90%, will put their SVR up by a quarter point.

"A minority will put theirs up by more than the base rate increase - by 0.3% or 0.35% - and you may have the odd lender that will put rates up by less that a quarter point."

Copyright Press Association 2007

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