Sub-prime crisis not having an affecting on UK prime mortgage market

Even thought many mortgage lenders have been raising interest rates on their tracker mortgages it is not an indication of the US sub-prime crisis hitting the UK prime market, according to moneyfacts.co.uk.

Over the last few days, a number of UK mortgage lenders have raised their rates on tracker mortgages for new customers by between 0.1% and 0.25%.

However, Julia Harris, mortgage expert at Moneyfacts.co.uk, says the rises are just a response to competitive pressures rather than lenders betting against any mortgage market uncertainties.

"It is far to early for the crisis to have reached the prime market, with tracker mortgages often financed from the lender's balance sheet, and only a few known lenders reliant on the current volatile LIBOR market. If the provider remains liquid, the UK housing market stable and arrears low, there is no immediate concern", she says.

Harris also says number of rate changes happening in the last few days is sparking unnecessary worry, which could worsen the whole situation.

Despite the rise in tracker rates, lenders have also been lowering prices on their fixed rate mortgages.

Harris says the decision to raise tracker rates may be due to banks having planned for a rate rise to 6%, which has yet to happen, or because a lender wants to increase or decrease its market share or to stay in line with its nearest rivals.

Harris believed the prime mortgage market is unlikely to be affected by the US sub-prime worries, but adds: "If we start to see more significant and prolonged increases, or standard variable rates begin to rise, then it may be a sign that the market is suffering at the hands of its investors."