Lenders increase cost of borrowing

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More signs that household borrowing is becoming more expensive emerged this week when lenders increased rates on a number of products.

Halifax, Britain’s biggest mortgage lender, and the Yorkshire Building Society have increased the rates for some of their new customers.

The rises come despite the Bank of England holding its base rate at 0.5 per cent, a record low which has been in place for more than three years.

But turmoil in the eurozone has been pushing up costs for lenders, who have blamed the increases on the weak economy and the increased cost of funding a mortgage.

Halifax increased its rates by up to 0.3 percentage points for new customers yesterday, meaning people taking out a deal could need to pay another £300 a year on a £150,000 loan.

Yorkshire Building Society also put up its rates on some products at 75 per cent loan-to-value or less yesterday, including its five-year fixed rate mortgage, which rose by 0.3 points from 3.89 per cent to 4.19 per cent.