Lenders begin passing on base rate increases

As the Bank of England announced it was to increase the base rate by 0.25% to 4%, Abbey was the first mortgage provider to announce an increase to its standard variable rate, passing on the full quarter point increase to give an SVR of 6%.

Barclays and Woolwich were quick to follow suit, saying they were also raising their standard variable mortgage rate by 0.25% to 6.04% from March 1 for both new and existing borrowers. Nationwide, Sainsbury's Bank and First Direct all increased their rates by 0.25% by lunchtime. Northern Rock also announced it would be increasing its standard variable
rate by 0.25% to 5.99%. Britain's biggest mortgage lender, the Halifax, said it was reviewing its rates but would not make a decision today.

Commenting on the rise, Bob Pannell of the Council of Mortgage Lenders, said: "If lenders raise rates by 0.25%, this will add around ?14.50 a month to the cost of a typical ?100,000 mortgage.

"Most households should have no difficulty absorbing this level of modest increase. But this is likely to be the first of several rate rises this year, and we expect rates to end the year at 4.5%.

"Borrowers should therefore make allowances in their finances for higher debt servicing costs as the year progresses. And people with high levels of unsecured credit as well as a mortgage should pay particular attention to their total increase in costs, not just the mortgage."