Yorkshire Building Soc ups mortgage rates, others to follow
LONDON, Sept 22 (Reuters) - Yorkshire Building Society [YBS.UL], Britain's third biggest building society, has raised the cost of its fixed rate mortgages in the wake of credit market turmoil last week and other lenders are likely to follow suit.
Yorkshire Building Society said on Monday that it would raise the interest rate of all its fixed-rate mortgages for loans worth 75 percent to 90 percent of the value of the property by 0.3 of a percentage point to 6.19 percent, effective immediately, in reaction to the jump in interbank lending last week.
London interbank offered rates (Libor) for overnight dollars soared to 6.43750 percent last Tuesday, the highest since January 2001, as banks' reluctance to lend to each other escalated in the wake of the Lehman Brothers' collapse.
Libor had fallen back to 2.96875 percent by Monday, still historically high. That is likely to force mortgage lenders to pass the increase in their borrowing costs to their customers, analysts said.
Nearly all UK mortgage lenders are likely to raise their rates said Michelle Slade, analyst at Moneyfacts Group.
"The longer it goes on, and swap rates increase, all lenders will pass some increase on (to borrowers)," she said.
Swap are used by banks to finance fixed rate mortgages.
Slade sees the average rate for two-year fixed mortgages increasing by 0.2 percent from its current level of 6.3 percent in reaction to the Lehman bankruptcy last week and the consequent tightening of credit conditions. However, the average rate is unlikely to reach the peak of 7.08 percent on July 11.
"We won't see rates over 7 percent," she said.
Ray Boulger, senior technical manager at mortgage broker John Charcol, said last week on his blog the severe liquidity problems would lead to many fixed rate mortgages being pulled.
"With both 3 month Libor and swap rates shooting northwards I expect many lenders to withdraw or re-price upwards both fixed rate and tracker mortgages over the next week," he said. (Reporting by Lorraine Turner; editing by Toby Chopra)
