THE Halifax, Britain's biggest building society, is lifting its
mortgage rate from 7.64% to 8.10% in the wake of last Monday's
half-point rise to 5.75% in the bank base rate which, the society
argues, was unnecessary.
The Abbey National bank and the Nationwide building society announced
last week that they were increasing their rates, the former by 0.35% to
8.09%, the latter by 0.4% to 8.14%.
The changes come into effect immediately for new borrowers and from
October 1 for existing borrowers. The new rates for Halifax savers
rather than borrowers will ''follow in due course''.
Along with other major building societies, including the Nationwide,
the Halifax has said the housing market was still in a fragile state and
that talk of interest rate increases, let alone an actual rise, could
damage recovery. It has also said that it did not believe an increase
was necessary.
However, Gary Marsh, head of group corporate affairs at the Halifax,
said yesterday he did not think the increase -- about #13 a month on a
#50,000 mortgage -- would have much effect on the housing market which
would remain flat this year.
Even so, he repeated the warning that continued speculation on further
increases in interest rates would have a damaging effect on confidence
in the housing market. And the Halifax is clearly unrepentent about its
view that a rise was not needed anyway.
''We see no real justification for last week's rise in the base rate,
and we certainly see no need for any future increases,'' said Mr Marsh.
He pointed out that there was no sign of inflation in the housing
market and suggested that all the other inflation indicators in the
economy were consistently coming in better than expected so there should
be no real reason for further increases.
The Halifax's view is at variance with a number of City economists who
believe rates will have to rise again next year, if not before the end
of the current year.
This year, the recovery has been led by industry and exports not
consumers, though clearly consumer confidence has to be a factor over
any reasonable period of time.
At the moment, it still seems to be lacking, particularly in relation
to the housing market and last week's retail sales figure for August
showed a slowdown in High Street spending.
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