Bradford & Bingley raises rates

Bradford & Bingley is a big lender of buy-to-let mortgages

Bradford & Bingley has become the latest lender to raise its mortgage rates for new borrowers.

Its rates for many new deals will rise by between 0.05% and 0.55% from Friday.

The bank said it was going to charge more for new mortgages because of the increased cost of raising funds in the financial markets.

Earlier this week the bank shocked investors by revealing it had fallen into the red because of increasing arrears among its mortgage borrowers.

Despite the Bank of England keeping its base rate unchanged at 5% on Thursday, the cost of borrowing between banks has continued to go up.

On Monday, Abbey is also expected to raise some of its rates, less than two weeks after a previous round of rate rises which pushed up the cost of some of its fixed-rate deals for new borrowers.

Three days ago the Nationwide building society raised the price of its new fixed-rate mortgage deals by up to 0.3%.

Acceptable returns

The Bradford and Bingley is the country's biggest lender of buy-to-let mortgages.

This week it revealed that arrears among these borrowers had shot up by 52% in just the first four months of the year.

All of its new fixed rate buy-to-let deals have increased by 0.55% and all of its new variable rate mortgages have gone up by 0.45%.

Some of its other mortgage rates are going up by a smaller margin.

"Our competitors have been re-pricing upwards in recent weeks and others have withdrawn from the market completely," said a B&B spokeswoman.

"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," she added.

Aaron Strutt of Chase de Vere mortgage brokers said this move from the B&B would soon make life more difficult for some existing buy-to-let mortgage holders looking for new deals when their current ones ended.

"With rates this high many buy-to-let landlords are finding it impossible to arrange finance on their properties," he said.

"Thousands can't remortgage away from their existing lender as the rent their property generates is not enough to fit new tougher rental calculations," he explained.

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