Funding concerns at the bank have resulted in rates being increased.
Mortgage lender Bradford & Bingley (B&B) has announced rate rises on its home loans deals.
The bank, which has issued a profit warning and seen its chief executive leave his post for medical reasons in recent days, is to put up repayment rates by between 0.05 and 0.55 per cent from today. B&B also said in a statement that it was currently having difficulty in raising funding from the money markets in order to meet its costs.
These revenue concerns are one of the primary features of the ongoing credit crunch, which has seen inter-bank lending rates for transactions performed on these markets rise to unusually high levels. The high rates have also contributed to the near-collapse of two other major financial institutions thus far: British lender Northern Rock last summer and US investment bank Bear Stearns this March.
B&B's balance sheet has been further negatively affected by increasing numbers of its mortgage customers falling behind on their payments: a trend which has also been experienced by other lenders. Indeed, a recent study from insurer Axa suggests that around 200,000 more UK households will be experiencing mortgage payment difficulties this year than during the housing slump of the early-1990s.
"Our competitors have been re-pricing upwards in recent weeks and others have withdrawn from the market completely," a B&B spokeswoman explained.
"This means that there is a risk that our lending volumes would increase to a point where our service levels would be under threat, and the increased cost of funding would mean we wouldn't make an acceptable return."
