Tonight:
8°c
Homebuyers are facing their first rise in mortgage rates for a year today raising fears that any recovery in the housing market could be "killed off".
Nationwide today increased the cost of its most popular deals, with experts predicting more providers were likely to follow suit in the coming days.
Banks are raising rates due to fears of inflation. These are growing as oil prices hit an eight-month high yesterday of $72 a barrel, and because of an increase in UK manufacturing output in April.
However, Alistair Darling today warned that the stirring economic recovery could be held back by soaring oil prices.
Telling families and firms that optimism on growth might prove premature, the Chancellor said: "I think it is important that people should not become complacent."
He said oil prices had "the potential to be a huge problem as far as the recovery is concerned".
About 80 per cent of homebuyers could be affected as banks and building societies increase the cost of fixed-rate mortgages, the most popular type of deal.
Nationwide has raised the cost by up to 0.86 per cent, and state-owned Northern Rock has increased its five-year fixed rates by 0.2 per cent, both coming into effect tomorrow.
Yorkshire Building Society and Principality Building Society have also raised prices.
Experts have predicted that possibly all of the part-nationalised Lloyds Banking Group — which includes Halifax, Bank of Scotland, Lloyds TSB and Cheltenham & Gloucester — would increase their fixed rates.
Ray Boulger at mortgage broker John Charcol, said the increases could be "in some cases by quite large amounts".
He warned that if rates rise too far, too fast, "it could very easily nip the recovery in the housing market in the bud".
It comes as the Bank of England announced that up to 1.1 million households are in negative equity.
David Hollingworth at mortgage broker London & Country said: "All the signs suggest fixed-rate mortgage rates are only heading one way — upwards. When a few lenders start raising rates, the rest of the market are quick to follow."
It also emerged that Mr Darling is likely to postpone the three-yearly spending review because of uncertainty.
A comprehensive spending review was expected this autumn to map out plans for a fourth Labour term in office. The last review was held in 2007 and set out plans from 2008-09 to 2010-11.
The Chancellor said his priority was to make public spending more efficient and officials have yet to begin the detailed work needed for a CSR.
"We've got massive uncertainty, to try to write a detailed budget... doesn't make sense."
Reader views (20)
Ted from London
Your wish that inflation rises in order to increase the interest rate on your savings is misplaced.
Savers are better off if interest rates are low because of the tax effect. Interest is merely 'compensation' for the effects of inflation and interest attempts to compensate for the loss of the value of the capital. However, governments 'tax' this compensation, thus reducing the amount of compensatory interest that you receive.
But if inflation is near zero, or even deflationary, and interest rates are also zero, there is no need to compensate you for the loss in value of your capital (ie, not interest), but as a result, you don't have to pay tax.
Therefore, you are actually better off if there is no inflation and no interest.
Receiving interest might comfort you, but its simply illusory if your capital is diminishing in value due to the effects of inflation/quantative easing/printing money. Indeed, if you have capital, you might like to invest it in something that retains its value despite what Darling does. Like property. 
- George, London
no wonder this country can no longer compete with India and China. Our pathetic economy is based on speculation of bricks and mortar nothing more.....
- Louisa, london
House prices have reached their peak after an out of control bubble..now..unless there is a massive increase in incomes and unemployment (by miracle) goes back to less than 5%, house prices are not going to rise naturally.
The rate rise is a balancing act to check the creating of next property bubble.
- R.Minto, london
As a ripped-off saver, as opposed to a property speculator or mortgage holder, I welcome this increase with a broad smile and look forward to a healthy rise in inflation to increase the interest I receive from my ratbag bank. For too many months, we savers have been silently subsidising profligate housebuyers, thus a dollop of justice is most welcome.
- Ted, London
Banks lend money to make money .... fact.
If money is not coming in at the rate it should then rates will rise to meet the cost of running P.L.Cs., even though the tax payers cash was needed to prop up some banks over all the money coming in is still down and shareholders like "SID" want there reward for investments with high dividend returns.
More and more mortgage rises will take place and the Bank of England will make a move to raise the rate .... I will say maybe a quarter of one percent every quarter, Why, because the theory that people will spend more when they have more in there pockets is not working .... therefore money has to be clawed back by The B.o.E. to raise money for the Treasury to pay for many many sevices.
The same thing is happening in Private business and offers will fall off, there is only so much you can give away.
So enjoy it while you can, and when the next Government is formed, and it is widely said that Labour won't be retuned to power, REMEMBER THIS?.
Conservatives did have intrest rates at 17 1/2 pecent when they were in power and well over three million people out of work, closed down vast industries, and sold off many nationlised companies for peanuts, got rid of the rates system for "POLE TAX" and now called council tax, so I say be very careful who you vote for?.
It is sometime's better the devil you know, and the devil that was once in power from 1979 to 1997 .... 18 long years should be given a wide berth?.
- John L., Scarborough North Yorkshire, U.K.
So, recovery is now firmly associated with rising house prices. I and many millions are for decreasing ones.
- Frederick, London
All this talk of trying to help 1st time buyers and those wanting a mortgage and the best they can come up with are fixed rates of 5.7% and above. If they really wanted to encourage spending they should be following the Base rate and lowering their rates more. There are plenty of people out there wanting to buy but not enough help. This will be the final straw for 1st time buyers....
- Pauline, North London
you have no idea were we are going. but just imagine in a few years time working with a lawyer or a councillor and you a labourer, all working on a new build. and them worring about their bills. inflation killing their assets.
while they are on a fixed wage.
- Julie, london
The Libor rate (rate at which banks lend money to each other) has gone down further to around 1.3% in June (It was 2% in March). Increasing the rates to borrowers is pure profit scam on behalf of the banks. How can a 6% or higher fixed rate Mortgage be justified when 2 or 3 years ago when the base and Libor rates rates where at 3%-4,5% a fixed rate Mortgae was available for around 5%. It just doesn't ad up - unless you are a bank of course!
- Matz, London
Hiher fuel prices and interest rates mean, higher food prices, mean higher production costs, mean lower sales, mean job losses, mean more reposesions etc etc etc, the Oil price we can do nothing about, but interset rates we can, especially as the govt are the largest stakeholder in many of these so called banks.
Our economy was wrecked by Bankers and govy apathy and the govt has lost control of it, its time to take the power of interest fluctuation back into govt control , i just do not trust the self interest group called bankers with our economy / recovery.
- Brian, Wiltshire
Georgie, it weren't Darling, it was bruin who abolished boom and bust, he has left us with BUST of monumental proportions, and Dearie has to try and sort things out and making a real pigs ear of it. But then he, with bruin et al, are more interested in making up schemes to replace the lost money they previously got for expenses.
bruin is adding to this by reappointing a number of the major offenders, not forgetting the serial expense abuser Malik. Clean up, not of politics, they want to clean up the expenses still left in the trough and come up with more ways to secure their retirement.
- Hugh, Middx
It doesn't matter what the interest rates are today; you are going to get hammered in the future, anyway.
Someone has to pay for the past; and that will be the ones that learned nothing from the past; History will once again repeat itself; bet your mortgage on it?
- Mickyinlondon, london
When will the MPs live in the real world
- Ray, Enfield
This is a good sign that the economic recovery has already begun. Well done PM for keeping your promises
- Keith Price, Luton, England
Stagflation?
- David Davies, Basingstoke, Hants
Oh, so the economy isn't independent of trade and global shifts then. I thought the good news on the economy was wishful thinking, along the lines of Blair's spend to save the economy closely followed by there's a problem with consumer debt levels. Thankfully the UK has oilfields, however how much of that revenue is coming back into the economy is another matter.
- Ian, London
HIP's certainly aren't helping first time buyers, I have a flat like many people I want to sell.
In the current climate it's unlikely even though affordable, but why would I spend several hundred pounds, then be out of pocket if I can't sell it.
Get rid of HIP's or at least put a pause on them till the economy has recovered.
- P Saker, LONDON
FOOD PRICES, PETROL PRICES, ENERGY BILLS AND NOW MORTGAGE PRICES GOING THROUGH THE ROOF - AND DIZZY DARLING RECKONS THE END OF THE RECESSION IS IN SIGHT.
HE SHOULD TRY TRIMMING HIS CATERPILLAR EYEBROWS - THEY ARE OBVIOUSLY EFFECTING HIS VISION.
- Reuben Camara, Morecambe UK
And the weak sterling and the unemployment and rest of recession still has to kick us down further. Oh why why why?!??
- Peteo, London NW1
But Ali Darling just said everything was fixed there's no recession?!
- Georgie, Islington, London
