Mortgages Uncovered

Defying government calls to provide cheaper mortgages Northern Rock, the government owned building society increased rates on its most competitive home loans after only reducing them ten days previously.

HSBC this week, withdrew a key popular mortgage product which was a tracker priced 0.99% above the BofE base rate for the full term of the loan – it had been reported that application volumes were three to four times higher than normal levels.

Raising the cost of its new fixed-rate mortgages Northern Rock have added interest by up to 0.3% to some of its products. The lowest rate it offers, is only fixed for a year and was also increased from 3.99% – 4.19%.

There were many mortgage brokers who believed that the bank had originally priced its new fixed rates too competitively which had resulted in a huge flood of new business.

“I suspect the reason is that they came in so cheaply,” said Melanie Bien at Savills Private Finance, the mortgage broker. “Northern Rock would have had a certain amount of money available at this low rate, which has now been used up.”

Northern Rock said it wanted to continue lending to new borrowers but at more modest levels.

“We will adjust our competitive standing at different times to attract or moderate business flows,”

it said.
Still HSBC and Northern Rock had offered the market some of the most competitive rates with. Woolwich still giving a fixed rate of 3.99% for 12 months, however, most lenders’ rates normally start between 4.3% – 4.5%.