Mortgage rates 'likely to rise in 2012'

Posted: 05 Dec 2011 11:33:26 GMT

The Bank of England has predicted a sharp upturn in mortgage rates during 2012.

Mortgage rates are set to increase significantly during the next 12 months, which could put struggling families under further financial pressures in the current economic crisis.

Lenders have started to up prices on new products despite George Osborne's claims that low borrowing payments were beginning to improve conditions for British families, reports the Financial Times.

Northern Rock, Nationwide, Clydesdale Bank, the Mortgage Works and Skipton Building Society already increased mortgage rates last week.

The recently released Financial Stability Report from the Bank of England (BoE) predicted further rises to the payments during 2012 as banks begin to pass on heightened wholesale funding costs.

"Mortgage rates have been steadily increasing over the last few weeks and some lenders have put their rates up two or three times," said Aaron Strutt from mortgage broker Trinity Financial.

Last week, governor of the BoE Sir Mervyn King called upon lenders to cut staff bonuses after he called the current economic situation "extraordinarily serious and threatening".

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