Mortgage rates are on the way up again, with HSBC, Woolwich and Yorkshire Building Society announcing increases of up to 0.5 percentage points on some of their deals this week.

Other lenders are likely to follow suit in coming days - bad news for those remortgaging or buying their first home. Lenders have been biding their time as the cost of borrowing in the money markets rose significantly in the past couple of weeks. No lender seemed brave enough to move first but now that the floodgates are open, we can expect rates to go up across the board.

The problem is the resurgence of Libor, the rate of interest banks charge each other. This has soared in recent days with three-month Libor climbing above 6 per cent - back to where it was in December. This hike has been caused by the collapse of Lehman Brothers, the bailout of insurance giant AIG and the Lloyds TSB takeover of HBOS.

Such extreme market volatility creates massive uncertainty and a reluctance among banks to lend to each other for fear that they won't get their money back. However, there is some good news with the Bank of England auctioning £40bn of three-month loans on Monday, which should bring down three-month Libor.

This should reduce the pressure on banks to hike their tracker-rate mortgages, although there are still likely to be some rate increases in the short term. These rate rises are disappointing as lenders had been reducing pricing in recent weeks.

Those borrowers coming up to remortgage should consider securing a rate now that they like the look of before it goes up. It is worth speaking to an independent broker about the right deal for your circumstances as you can secure rates for up to six months before you need one.

Source:
http://news.sky.com