Mortages Could Take a Hit from the EuroZone Crisis

Some high street mortgage lenders including Woolwich, Santander and Halifax have increased their tracker rates on their products.

This increase follows a rise in the interest rate at which banks lend to one another.  Libor, the latest inter-bank offered rate, has been inching higher and higher amidst worries over the Eurozone crisis.  A rise in Libor could indicate that banks are becoming increasingly less confident in lending to each other.

“It is a diluted version of what happened after the Lehman crisis,” said David Hollingworth, from mortgage broker firm London and Country.

“We could be seeing a significant reversal in rates. Over the summer mortgage lenders were competing harder with each other. Now that is changing.”

Even though the average tracker rate has not changed hugely since the summer, there are indications that suggest the direction is going to edge up rather than down.

The Chelsea Building Society recently increased its competitive tracker mortgages by 0.2%.

However, it’s not all bad news.  It doesn’t mean that those looking for a mortgage will need to pay thousands more, but those expecting the rates to fall significantly may need to rethink their approach and their finances.  If you are looking for a new property it’s always a good idea to check out the whole of the market so that you can get the big picture on rates to see which is best for your needs.

Over the last few weeks, Halifax has also raised its two-year tracker to 3.34% whilst the Woolwich increased its tracker rate by 0.4%.

In a similar move, Santander increased its Abbey lifetime tracker from 2.95% to 3.09%.  ING and Nationwide are also increased rates on their products.

“Several lenders are edging up trackers,” said Ray Boulger, of mortgage broker John Charcol.

What happens next “depends on how fast the euro crisis develops”, he said.