Mortgage rates 'affected by confidence'

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Higher costs of borrowing among banks is keeping mortgage rates high, an expert claims.

Speaking on BBC Radio 5 Live's Wake Up To Money programme, Investment Property Databank economist Sabina Kalyan said banks "lacked confidence" to pass on interest rate cuts by the Bank of England (BoE).

Her comments came on the heels of an announcement by Nationwide that it had raised its new fixed rate and tracker mortgage products by as much as 0.5 per cent.

"The problem is this isn't so much a case of lack of liquidity; there is money out there," she said.

"We're not going to see as consumers any cheap deals for a long time."

She said banks lending to each other were charging higher interest rates because of this lack of confidence, so while the BoE was cutting rates the industry was not following suit.

The BoE has cut interest rates three times, at a total of 0.75 per cent, in the last five months.

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