Nationwide joins rush to raise mortgage rates

The move by the Nationwide will see the cost of new tracker mortgages rise by up to 0.2 per cent.

It follows similar increases by the Halifax, Abbey and the Bank of Scotland caused by the worldwide "credit crunch" which has forced up the cost of borrowing for most financial institutions.

The news came as house prices fell in five regions last month - the East Midlands, the North-East, Wales, the South-West and East of England.

The Land Registry said London and the South had continued to see big increases but, overall, a slowdown was expected throughout the market over the next six months.

The national average house price was £182,914, up by 9.4 per cent in the past year. The most expensive properties were in London-with an average of £349,838, while the cheapest were in the North-East at £128,758.

The Land Registry said an average of 99,736 homes changed hands each month between March and June, which was down from 106,090 during the same period last year.

Higher interest rates are driving buyers out of the market in many parts of the country.

As the credit crunch bites, many would-be buyers, particularly first-timers, are expected to find it harder to find someone willing to lend them more than 90 per cent of a property's value.

A Nationwide spokesman said its new mortgage deals reflected changes in the cost of borrowing money on the international markets and were designed to ensure it remained competitive.

Its rate changes will also include some marginal reductions on fixed rate mortgages, an average of around 0.1 per cent, because this money is borrowed from different sources than that used to fund tracker loans.

Earlier this week, Nationwide reported that the growth in house prices has fallen to 9 per cent, which is the lowest level for nearly a year.

And figures from the British Bankers' Association showed the number of loans agreed for house purchase in August were down by 14 per cent on the same month last year.

The credit crunch has increased the danger of a recession, Alan Greenspan, the former chairman of the U.S. Federal Reserve, said yesterday.

Mr Greenspan, an adviser to Gordon Brown, said the chance of a downturn was still less that 50 per cent. But he conceded he was "less optimistic than one would like".

He told Radio 4's Today it was inevitable the house price bubble would burst and said central banks such as the Bank of England had no control over "real" interest rates.