Banks start interest rate rise

Three banks have raised mortgage interest rates in response to the continued uncertainty in financial stock markets amid fears the US sub-prime loan crisis could hit the UK.

Abbey raised the rate on its tracker mortgage for new customers by up to 0.2% and Standard Life and Halifax soon followed.

“These changes reflect moves in the market that have been experienced,” said Abbey’s head of mortgages Nici Audhlam-Gardiner. “We expect that these current trends will be sustained over a significant period and that other companies will follow immediately.”

The head of the Bank of England Mervyn King has warned businesses and homeowners to expect further rate rises in the months ahead as banks attempt to cover their losses.