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Another blow for borrowers as Lloyds puts up its mortgages
Jonathan Prynn and Mira Bar-Hillel29 Sep 2008
Lloyds TSB today became the latest major lender to raise its mortgage rates in response to global turmoil in the financial markets.
The banking group, which also lends under the name of its subsidiary Cheltenham & Gloucester, said its two and three-year fixed rate mortgages will go up by 0.26 per cent. It follows similar moves last week by HSBC and Halifax, currently being taken over by Lloyds TSB.
First-time buyers and borrowers reaching the end of existing fixed-rate deals will be hardest hit by the rises, which the banks blame on jumps in the cost of wholesale funding since the collapse of Lehman Brothers two weeks ago.
Libor, the inter-bank lending rate, increased again today to 6.28 per cent despite the bank bail-out deal agreed in America over the weekend. This suggests that banks are still extremely reluctant to lend to each other.
The only glimmer of hope for home owners is a belief in the City that a cut in the Bank of England base rate, now five per cent, is looking increasingly likely next month.
Estate agents are calling for action after the Bank published "very disturbing" figures showing a massive fall in mortgage lending last month to a record low. Property experts blamed uncertainty over stamp duty for the meltdown.
After stripping out mortgage repayments and redemptions, the industry lent a mere £143 million in August, an unprecedented 95 per cent fall in a month and 98 per cent in a year. The number of home loan approvals has fallen from 115,000 in August last year just before the Northern Rock crisis erupted to only 32,000 last month.
Agents said there had been tentative signs of recovery in the first half of this month but these had been snuffed out by the chaos of recent weeks.
Property prices in London are still falling, according to the latest survey. Figures from market monitor Hometrack show average prices fell £3,000 between August and September, to £293,600. Prices in the capital have fallen by 7.3 per cent, or about £23,000, since September last year - when the average was £316,000.
Nicholas Leeming, major client director of propertyfinder.com, said: "Despite falling confidence people still want to move home but the housing market has come to a standstill as mortgage availability has dried up. The situation was exacerbated in August by lack of immediate clarity from the Government on stamp duty rumours."
Peter Rollings, managing director of London estate agent Marsh & Parsons, said: "It's as though the ability to buy property has been withdrawn from the average person in the street and this can't be allowed to continue. This must serve as a serious call to action for the Government, Financial Services Authority and Bank of England.
"We're now seeing just how bad the situation could get if we continue to rely solely on market forces to get the housing and mortgage markets moving again."
Reader views (1)
So "the ability to buy property has been withdrawn from the average person in the street" has it? Stupid man, that 'ability' wasn't there in any case thanks to the excessive prices the banks fostered with their lend anything to anyone policies. I'm hoping to get a cheap place to live in a closed estate agent's office soon...
- Mym Finchley, London, UK., 29/09/2008 17:29
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