Barclays shove mortgage costs up

There is still a mortgage famine ??â??â?? and despite the billions of pounds of public money being pumped into the banks ??â??â?? one of the leading lenders is going to increase the cost of fixed-rate mortgages.

Barclays is pulling its 3.99% four year fixed rate deal which was on offer to borrowers with a 40% deposit. The offer was a market leader.

It also going to raise the cost of its three and four-year fixed rate mortgages by up to 0.4 percentage points.

The move by Barclays is likely to trigger similar moves by other lenders.

The Barclays price hike comes in the face of massive public and political criticism. The government has pumped in millions of pounds worth of taxpayers money to save the banks from collapse and the government has implored banks to start offering a wider range of competitively priced mortgages without demanding a massive deposit.

The rise comes despite the Bank of England leaving rates untouched earlier this month after a series of swingeing cuts which have left interest rates at an historic all-time low of just 0.5 per cent. It also comes at a time when banks such as Goldman Sachs have said they will persist with massive 33 per cent salary hikes ??â??â?? despite the public??â??â??s outrage over bankers greed and the bonus culture.

Woolwich ??â??â?? the mortgage limb of Barclays ??â??â?? says it is having to raise rates because of the rising cost of longer-term wholesale borrowing with which it funds mortgage lending.

Other mortgage providers are thought likely to follow the Barclays/Woolwich move and brokers are predicting a rush of people trying to secure longer-term fixed rate mortgages before anymore rises take place.

The lack of appropriate mortgages in the market is acting as a major brake on the property market.

Latest figures show that there has been a four-fold increase in the number of good ??â??â?? or credit-worthy borrowers ??â??â?? being turned down by lenders. Nearly nine per cent of applications have been rejected by lenders ??â??â?? compare with 2.3 per cent in 2007.