Rock raises its rates for new loans

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The nationalised bank told borrowers that fixed-rate deals were going up by 0.2 or 0.3 percentage points. That will add up to £40 a month to the cost of a interest-only loan of £150,000. Its cheapest one-year deal will rise from 3.99 per cent to 4.19 per cent.

The move was confirmed while Alistair Darling was on his feet in an emergency debate on the mini-budget. Shadow chancellor George Osborne demanded confirmation - and said it was "extraordinary" that a state-owned bank was charging more while the Bank of England was lowering rates.

Mr Darling said that part of Rock's business plan was to cut the number of people to whom it lends. The rise only applies to new loans. The group is also raising rates on its two, three and five-year fixed-rate loans.

The bank said the move was to ensure it did not breach competition constraints put in place to ensure its government guarantee did not give it an unfair advantage.