Millions face higher mortgage bills

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Santander has joined a number of other providers in raising the rates on two of its mortgage products.

It has put up the rates by 0.1% on both its 60% and 75% loan-to-value two-year products for new customers.

The move follows similar announcements from NatWest/RBS and Halifax, which will see monthly mortgage bills increase for millions of people in the UK.

Customers with a NatWest/RBS offset mortgage have already seen a rise of 0.25% and from 1 May there will be rise of the same level for customers on the RBS One Account Mortgage. The increases will bring both rates to 4% – the same as the bank's standard variable rate (SVR) deal – which is set to remain unchanged.

Meanwhile, Halifax is due to increase its own SVR mortgage rate from 3.5% to 3.99% from 1 May, adding around £16.40 to monthly payments for around 850,000 customers.

The main reason given by the banks for the rise is increased costs associated with funding a mortgage and the higher interest rates being paid out to savers.

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Mortgage rate rises

A spokesperson for Halifax said: "Throughout 2007, prior to tightening economic conditions, the average savings rate was 1.18% lower than the bank of England base rate.

"However, since 2008, the average savings rate is 1.27% higher than the base rate. This demonstrates the increased cost that banks must pay to attract retail deposits and longer-term funding costs are particularly high."

Grant McDonald, spokesperson for RBS/NatWest, echoed this sentiment: "Over the past year the cost of borrowing the funds we need to service our mortgage commitments has risen considerably. We have absorbed the cost during this period but have now decided to pass on some of this increase - 0.25% to our offset and One Account customers."

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