Nationalised bank Northern Rock has increased interest rates on its mortgage offers
Northern Rock has increased the interest rates on a number of its mortgages, despite government calls for banks to pass on the Bank of England base rate cut to consumers.
While it did do this, leaving its standard variable rate at 5.84 percent after the 1.5 percent cut, this offer will only be available to existing customers, not new ones. Despite being nationalised earlier in the year, Northern Rock has now raised the cost of a number of fixed-rate deals by between 0.2 and 0.3 percent.
This goes against a statement by the business secretary, Peter Mandelson, who said banks would have to get lending again or face legal action.
However, a spokesman for Northern Rock said that the price hikes were necessary to stop it outpacing the competition. It had promised that it would not use the fact it was backed with public money to gain an advantage over other lenders.
Despite this, Aaron Strutt, from mortgage brokers Chase de Vere, told the BBC that the bank's offers were still attractive relative to the market as a whole. "They have low rates on several deals, albeit with high deposits, low fees, and will lend up to £1 million. The main selling point is that they are fully flexible, so you could pay off your mortgage down to just £1, and then borrow it all back again," he said.
