Borrowers hit as Halifax and Nationwide lift rates rates

The largest mortgage lender and the largest building society were the first to inflict 0.25% increases on their standard variable mortgage rates yesterday, in line with this week's Bank of England base rate increase.

Nationwide, the largest remaining building society, was first to announce an increase for mortgage customers to 6.95%, coupled with the same rise for holders of Nationwide savings accounts. A borrower with a £50,000 repayment loan will now pay an extra £7.36 a month bringing the total up to £339.92, while an interest only borrower with the same size mortgage will suffer a £9.79 increase to £272.21.

Halifax followed swiftly with news that it will raise its rates from 7.24% to 7.49%. Cheltenham & Gloucester, which handles the mortgage busi ness for Lloyds TSB, the UK's third largest lender, will also lift rates by 0.25% to 7.49% But Northern Rock, another lender in the top ten by mortgage assets, bucked the trend by leaving mortgage rates pegged at 7.29%.Homebuyers suffered further misery yesterday as a top endowments company revealed sharply lower returns on its with-profits policies which back thousands of mortgages.

And experts say there is worse to come with policy payouts likely to fall further over the next years - adding to the woes of endowment mortgage holders, many of whom have already been told to boost monthly premiums if their policies are to pay off their loans in full. The falls will impact on future pay-outs whose levels depend on present and past bonuses.

Life insurer Norwich Union announced yesterday that it had cut bonus rates on with- profits policies for the fourth consecutive year. The downward moves echo Friends Provident's falling bonus rates announced earlier this week and are set to be followed by other big endowment names.

Despite last year's big stockmarket advances, payments to holders of Norwich Union's maturing 25-year endowment policies - frequently used for home loan repayments - fell by 8.7%. A £50-a-month policy taken out by a 29-year-old man in January 1975 is now worth £89,518; a similar plan, started in 1974 and maturing 12 months ago, £98,037.

Holders of £50-a-month ten- year endowments - often used for savings plans - saw their final payouts fall by 4.5% to £9,479. The annual endowment bonus fell from 2% to 1.5% of the sum assured while the bonus paid on past bonuses dropped from 3.25% to 2.75%. Bonuses on newer style "unitised" with profits policies are also lower.