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Alliance & Leicester hike some of its mortgage rates as a result of global credit market crisis
Last updated at 16:07pm on 21.09.07Alliance & Leicester today became the latest lender to increase some of its mortgage rates as a result of the turmoil in global credit markets.
The UK's eighth largest lender said it was raising rates on its tracker mortgages by between 0.1 per cent and 0.2 per cent from today for new customers and people remortgaging.
The move follows similar rises by both Britain's biggest lender Halifax and the country's second biggest lender Abbey which were announced last week.
Richard Taylor, head of mortgage products at Alliance & Leicester, said: "We are keeping our competitive fixed-rate deals, but in line with the market our variable rates have been raised by a modest amount."
The move will see the group's two-year base rate tracker with a £599 arrangement fee increase to 5.79 per cent from 5.59 per cent, while its two-year base rate tracker with a £1,499 arrangement fee will increase by 0.1 per cent to 5.54 per cent.
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Other UK lenders increasing rates are Standard Life, Abbey and Halifax
Alliance & Leicester's two-year FeeSaver tracker will rise by 0.1 per cent to a new rate of 6.09 per cent.
A number of lenders have now increased their variable mortgage rates, including Standard Life and other members of the Halifax Bank of Scotland Group, as well as Abbey and Halifax.
Banks are raising their rates in response to an increase in the interbank lending rate as a result of the crisis in the US sub-prime mortgage market, which lends money to people who would be turned down by mainstream banks.
High levels of defaults on these loans, which some claim should never have been advanced in the first place, have rocked global credit markets as the loans are packaged up and sold on to investors in order to spread the risk.
This has led to interbank lending effectively drying up, sparking the crisis at Northern Rock. The Council of Mortgage Lenders has also warned that the reduction in available funding could hit the supply of mortgages.
But there are hopes that the problems could ease after the Bank of England said it would pump at least £10 billion into longer-term money markets.
Meanwhile, internet bank Egg became the latest lender to announce it was cutting the cost of its fixed-rate mortgages.
The group said it was reducing the interest rate on its three-year fixed rate loan by 0.16 per cent to 5.89 per cent for new customers from September 24.
It is also launching a new two-year fixed-rate mortgage which will also charge interest of 5.89 per cent.
