HSBC hikes mortgage rates on market turmoil

Thu Sep 25, 2008 8:26pm BST

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LONDON (Reuters) - HSBC is hiking the cost of its fixed mortgages from Friday in reaction to credit market turbulence last week, a move widely expected by analysts.

HSBC, the country's ninth largest lender, said it would increase the interest on its range of fixed rate products to 6.27 percent from 5.97 percent, following in the footsteps of Yorkshire Building Society on Monday. Fees will decrease to 499 pounds from 799 pounds.

"With swaps spiking over the last week by 40 bps, we have tried to maintain choice in the market, but also not reducing LTVs (loan to value)," said HSBC.

Swaps are used by banks to finance fixed rate mortgages.

Turmoil in the markets last week led to a tightening of wholesale funding and a jump in the interbank lending rates.

(Reporting by Lorraine Turner)

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