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UK Interest Rate Rises on Subprime Mortgages and Credit

Housing-Market / Mortgages Sep 02, 2007 - 09:43 PM GMT

By: MoneyFacts


BMW credit card from Amex increases rate by 7%
Samantha Owens, Head of Personal Finance at the money search engine comments: “The standard purchase rate of 9.9% APR made the BMW credit card from American Express a very attractive proposition, but with effect from 28 August, the rate has been hiked by seven per cent to 16.9% APR.

“The card has no 0% introductory offers for balance transfers or purchases, so now becomes a very average product and is unlikely to attract much in the way of new business, especially when you consider that Barclaycard Simplicity comes with a standard purchase rate over ten per cent cheaper at 6.8% APR.”

Double rate hike from High Street Home Loans
The fallout from the US sub prime mortgage crisis and subsequent difficult market conditions continues to impact lenders in the UK sub prime arena.

High Street Home Loans (HSHL) increased its LIBOR discount and fixed products by one per cent on 23 August, and then some six days later, on 29 August, raised its rates again by a further one per cent.

HSHL a division of GMAC – RFC Limited says it has taken this step as a result of the unprecedented circumstances within the world's mortgage markets and although it feels this is a short term situation they feel it necessary to take this action at this current time.

Julia Harris, Mortgage Expert at the money search engine, comments: “Consumers with less than perfect credit records have benefited from extremely attractive rates over the last couple of years, due to competition within this market keeping rates down. We are now seeing the margins between prime and sub prime residential mortgages starting to widen: unfortunately this will impact more on those that are already struggling.

“With signs that house prices are starting to cool, combined with current market conditions, mortgage applications for sub prime products are likely to come under closer scrutiny from lenders.”

The table below highlights some of the sub prime product changes we have witnessed during the last couple of weeks, and no doubt there will be more to follow.

Lender Changes
Alliance & Leicester Self-certification fixed increased by up to 0.79%, sub prime fixed increased by up to 1.16%, variable rates withdrawn.
Advantage All sub prime mortgages withdrawn
Amber Homeloans Self-certification fixed increased by 0.10%, self-certification increased by 0.50%
Birmingham Midshires Solutions Selected sub prime full status increased by up to 0.70%, sub prime self-certification increased by up to 0.50%.
edeus Selected sub prime variable and fixed rates increased.
First National Withdrew 95% and FTB+ range
GMAC Unlimited and lowfix range withdrawn. Prime mortgages increased by 0.50% and Sub prime 0.75%. No longer lend at 95% LTV.
High Street Home Loans Rates increased by total of 2% over 2 weeks
Kensington Mortgages Sub prime fixed increased by 0.55%
Mortgages PLC Sub prime fixed increased by up to 1%
Northern Rock Sub prime fixed increased by up to 0.55%, Variable reduced by 0.10%
SALT No longer accepts applications with arrears in the last 3 months
SPML Increased all sub prime rates
Victoria Mortgages Withdrawn entire range - The Money Search Engine

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