Abbey raises some mortgage rates

Abbey has been increasing its share of the mortgage market

Abbey has put up the interest rates on its tracker mortgages for new customers by 0.5%, in the week the Bank of England is expected to cut rates.

Two-year trackers have gone up from 5.79% to 6.29%, and three-year rates from 5.69% to 6.19%. Existing customers are unaffected.

The majority of economists expect the Bank to cut rates by 0.5% on Thursday.

Abbey says it is responding to similar moves by its competitors and says it has recently cut some fixed rate deals.

It also says that in the first nine months of 2008, its net lending mortgage market share was 28% - so it has been taking a large share of new lending.

Most mortgage lenders are increasing the margins on tracker deals, as well as making it tougher for borrowers to get them by asking for better credit ratings and bigger deposits, BBC personal finance correspondent Richard Scott says.

Both of Abbey's tracker mortgage products, for example, are only available with a 25% deposit.

The changes will take effect from Wednesday, Abbey said.

'Credit squeeze'

Meanwhile, researchers at moneysupermarket.com have criticised mortgage lenders who have so far not passed on last month's Bank of England interest rate cut.

While lower fixed term rates might have been offered to customers two or three years ago...it's now more costly to the banks to get that funding and higher rates are a reflection of this Brian Capon, British Bankers' Association Pass on rate cuts, say MPs

It claims that thirty lenders have not yet passed on the 0.5% cut to their customers on standard variable rate (SVR) mortgages.

In addition, of those who have passed on the reduction, 34 have not passed on the full amount, the researchers said.

"An SVR deal is generally linked to decisions taken by the Monetary Policy Committee," said moneysupermarket.com's Louise Cuming.

"Thanks to the credit squeeze, there are now more borrowers who are being forced onto SVRs as they simply can't get a more competitive deal elsewhere which means this is a serious problem for them."

In response, the British Bankers' Association said banks' rates will now always be more than the Bank of England's base rate.

"Banks' lending rates reflect the cost to the bank of providing those funds, typically based on the wholesale market rates," said BBA spokesman Brian Capon.

"While lower fixed term rates might have been offered to customers two or three years ago, the market has since moved on; it's now more costly to the banks to get that funding and higher rates are a reflection of this."