Lenders 'passing on' price hikes to consumers

It has been claimed by one expert that the reason mortgage lenders are not reducing their interest rates in line with the recent Bank of England decision is because of the rising funding costs.

Capital Economics economist Paul Dales has explained that although lenders’ decision to maintain current interest rates may be interpreted as an attempt to maximise profits, it is in fact a result of mounting pressure.

The ongoing credit crunch was cited by Mr Dale as a reason for higher costs in funding from the wholesale market, which in turn, has led to organisations ‘passing on’ the hikes.

In a statement that may be of interest to those looking to buy a house in Scotland, Mr Dale said: "I have been quite surprised at how marked the rises in mortgage lenders’ rates have been, how widespread it has been and how many lenders have had to pull different mortgages."

The Daily Mail recently reported that some mortgage lenders that have not reduced their interest rates have received criticism from some commentators following the Bank of England’s decision to reduce the base rate to five per cent.