Gloom deepens for property market as big lenders announce mortgage rate hikes

On Friday, Bradford & Bingley imposed a sharp rise in the interest charged on new fixed-rate deals of up to 0.55 per cent.

Abbey said it will push up rates across its fixed-rate deals by between 0.07 and 0.26 per cent.

Sign of the times: Buyers are finding mortgages more expensive and harder to come by

The moves come just a few days after the second biggest mortgage lender, Nationwide, and the Alliance & Leicester, rushed through rate rises.

The widespread increases will mean anyone taking out a deal will be charged hundreds of pounds more a year, driving buyers out of a struggling market.

It is also disastrous for the hundreds of thousands of people who are coming to the end of cheap, short-term, fixed-rate and discounted deals.

It suggests the 'payment shock' caused by having to move to a more expensive mortgage will be even worse than feared.

The move by the four lenders provides further evidence that the Bank of England and its Monetary Policy Committee have lost control of interest rate policy.

The MPC cut the base rate three times in recent months. It decided the figure should remain at 5 per cent this week.

But the UK's biggest lenders have repeatedly raised the cost of fixed-rate deals.

The credit crunch has made the Bank of England base rate less relevant in setting a benchmark for what consumers pay.

The more expensive deals result from an increase in the cost of borrowing money on the wholesale market. It is said to have risen by 0.6 per cent recently.

Some lenders have even been increasing rates to drive customers away.

B&B made the news for a collapse in profit and a controversial attempt to raise money. It announced an £8million pretax loss from January to April on Monday.

It is raising rates on its standard residential, buy-to-let and self-certification mortgages of 0.05 to 0.55 per cent.

The changes mean a three-year fixed rate with a fee of 1.5 per cent will be charged at 7.44 per cent interest.

The bank claimed the rises were necessary to head off a stampede of customers.

It said: 'In our key market of buy-to-let, competitors have been repricing upwards and others have withdrawn. There is a risk that our lending volumes would increase to where our service levels would be under threat and the increased cost of funding would mean we wouldn't make an acceptable return.'