Consumers feel the pain as mortgage rates continue to rise….

The credit crunch on Thursday forced three of the UK’s biggest lenders to tighten the supply of home loans and charge more for them in moves that are likely to put further pressure on the property market.

Millions of home loan borrowers now face higher interest rates as banks pass on higher wholesale funding costs as conditions worsen in money markets.

Home loans will also become harder to secure from Friday, even for those with unblemished credit records, as banks apply more stringent criteria to mortgage approvals and pull some competitive products to avoid being flooded by new applications.

More than 2.75m people will be hit when they come off any sort of mortgage deal this year – whether it is a tracker or fixed-rate deal.

Nationwide, the UK’s second largest mortgage lender, increased interest rates on one of its main products to deter new borrowers by making them less attractive. It will increase the cost of two-year mortgage tracker rates for new customers by 0.57 percentage points to 7.1 per cent and is increasing its fixed rate mortgages by 0.2 percentage points.

Cheltenham & Gloucester, part of LLoyds TSB, increased the prices of certain two-year tracker rates by about 30 basis points, as did IF, a subsidiary of HBOS.

The moves will be a blow to consumers who are due to refinance mortgages this year and face a sharp jump in monthly payments.

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