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Upwards pressure on mortgage rates

Lloyds bank has today become the second UK mortgage company to increase its standard variable mortgage rate for new customers. This rate will run in tandem with the current guaranteed standard variable rate which the bank promised would never rise more than 2% above the Bank of England base rate. However, the new rate will be introduced from 1 June and will be priced at 3.99% which is obviously well above the 2.5% current standard variable rate customers are being charged.

Despite the fact this promise was made at the beginning of the decade it seems that pressure on margins and an increase in the cost of borrowing in the money markets have seen the likes of Lloyds bank announce changes for the future. It is likely that more and more mortgage companies will follow suit because it is common knowledge that profit margins are being squeezed although an increase in mortgage rates will not assist a recovery in the UK property market.

The UK financial sector is stuck in a very difficult position because as the cost of borrowing goes up, due to problems within Europe and the Greek debacle, mortgage and loan rates will need to rise. This comes at a time when consumers are struggling to make ends meet and the UK property market is crying out for more buyers.

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