Mortgages keep pace with base rate rise

A clutch of lenders today announced they were raising their mortgage rates following the Bank of England's decision to increase the cost of borrowing.

The Bank's monetary policy committee yesterday raised base rates for the first time in nearly four years from 3..5% to 3.75%.

Cheltenham & Gloucester, part of Lloyds TSB, said it would be passing on the full quarter point hike to borrowers, increasing its standard variable rate to 5.75%. The change, which comes into effect on November 10 for new customers and December 1 for existing ones, will increase the cost of a ?60,000 interest-only mortgage by ?12.50 a month to ?287.50.

Sainsbury's Bank and Mortgage Express also both announced they were raising their tracker mortgage rates by the full quarter point.

Telephone and internet bank First Direct increased the rate of its offset mortgage by a quarter point to 4.75%, while HSBC said it was increasing its home buyer variable rate mortgage by a quarter point to 4.74% from December.

Nationwide yesterday said it was increasing its base mortgage rate by 0.35 percentage points to 4.89%. Surprisingly, it also raised the rate of interest it paid savers.

But most of the major lenders, including Halifax, Abbey, Barclays and the Royal Bank of Scotland Group, said they were still reviewing their rates today, although the majority are expected to increase them.

The increase in interest rates is likely to have little impact on people's ability to pay their mortgage as the cost of borrowing still remains historically low.