Lenders put up rates

Huddersfield Daily Examiner (Huddersfield, England), Oct 16, 2008

TWO mortgage lenders have put up their tracker rates as the cost of inter-bank borrowing again failed to reflect the recent cut in interest rates.

Lloyds TSB said it was raising the cost of its mainstream trackers by between 0.3% and 0.5%.

Barclays' lending arm the Woolwich is increasing its lifetime and offset tracker rates by 0.2%.

The Woolwich cut the cost of its tracker deals by 0.5% following last week's Bank of England base rate cut.

But Lloyds, which also lends under the Cheltenham and Gloucester brand, failed to do this.

This means the differential between the cost of its deals and the base rate has risen by between 0.8% and 1%.

Both groups blamed their decision on recent rate increases by competitors.

Part of the problem is that wholesale money markets have failed to respond to last week's interest rate reduction.

The key inter-bank lending rate is three-month Libor, upon which many variable rate mortgages are based.

This has remained stubbornly high despite the 0.5% fall in the official cost of borrowing.

It has just edged down by four basis points, but still stands at 6.21%, well above the Bank of England base rate of 4.5%, as banks continued to be reluctant to lend to each other.