Northern Rock, the stateowned bank, yesterday defied government calls for cheaper mortgages as it increased the rates of its most competitive home loans just 10 days after reducing them.

HSBC also withdrew one of its popular mortgage rates – a tracker priced 0.99 per cent above the base rate for the lifetime of the loan – as it said business volumes were three to four times above normal levels.

Northern Rock raised the cost of some of its new fixedrate mortgages by up to 0.3 of a percentage point. Its lowest rate, which is fixed for just one year, was increased from 3.99% to 4.19%.

Mortgage brokers believed the bank had priced its new rates too competitively, resulting in a flood of new business in recent days. 'I suspect the reason is that they came in so cheaply,' said Melanie Bien at Savills Private Finance, the mortgage broker. 'Northern Rock would have had a certain amount of money available at this low rate, which has now been used up.'

Financial Times

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