Banks are becoming less willing to lend to each other due to the ongoing financial crisis - which will lead to further rate increases.
Lenders have hiked mortgage rates, in response to the recent rise in inter-bank rates.
The turbulent market conditions of recent days led to Libor - a key rate at which banks lend money to each other - rising to six percent on Friday. This is the highest level the rate has reached since April, and 0.3 percent up from the previous week.
In response to these funding restrictions, lenders including iGroup and First National have imposed mortgage rate rises, over and above the Libor increase. The firms, both owned by GE Money, put up rates by up to 1.7 percent and 1.6 percent respectively.
Other lenders seem set to follow suit over the weeks to come as the Libor pressures begin to eat into their ability to raise funds, the Press Association reports.
Libor's climb comes as a reaction to extreme volatility in the financial system. The FTSE 100 first plunged this week, on the news of Lehman Brothers' bankruptcy - and then enjoyed its biggest-ever one-day rise on Friday as the US government unveiled its £400 million package to take banks' "bad assets" off their hands.
HBOS has also been caught up in the turmoil, taken over at the knock-down price of £12.2 billion by Lloyds TSB in a government-backed deal.
Economists, in the main, see these events as signalling that the credit crunch - and the restrictions on mortgage lending - will last longer than previously thought. Speaking to the Observer newspaper last week, Howard Archer at Capital Economics said: "This highlights the fact that it's going to go on for a lot longer than people expected. Obviously, the credit crunch has deepened.
"The banks are going to be even more reluctant to lend, and that's going to make mortgages even more expensive."
