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Abbey today increased the cost of its tracker mortgages by 0.5% - just two days before the Bank of England is expected to cut interest rates by at least a similar amount.
Abbey said it had been forced to hike rates in response to similar moves by competitors, particularly Halifax, Nationwide and Northern Rock. Lenders have continued to hike rates and tighten lending criteria in recent weeks as they look to reduce their exposure to the UK housing market.
In the first nine months of the year Abbey had 28% of the total UK mortgage market, the company said in a statement.
‘Abbey has market leading 2, 3 and 5-year fixed rate mortgages which have been the majority of our new business,’ an Abbey spokesman said. ‘Recent moves by competitors increasing tracker rates and withdrawing products, has resulted in today’s decision, which takes effect from Wednesday 5 November.
‘Despite difficult market conditions, Abbey has continued to provide competitive mortgage deals for all our customers across our range and continues to do so.’
Separately, HSBC also appears to be warning that any interest rate cut will not be passed on in full to borrowers.
Such moves are likely to increase the dilemma for the Bank of England, which on Thursday is expected to cut rates by up to 1% in a bid to boost the flagging UK economy.