Bank downgrades could cause mortgage rates to rise.

Home-owners were warned by the BoE to watch rising mortgage rates in reaction to euro-zone crisis.

Hope was then offered by the announcement of a joint BoE and Government funding for lending scheme where over £100 billion would be available to UK banks and building societies. Home-owners were advised that this venture could see mortgage rates reduce.

Now home-owners and would-be buyers are once again being warned of a likely increase to mortgage rates due to the downgrading of British banks by Moodys.

Some major high street lenders have had their credit rating downgraded. Lloyds, Royal Bank of Scotland, Barclays and HSBC have been downgraded in a move which lowers the credit rating of global banks. The move has been blamed on exposure to both volatility and the risk of out sized losses.

Which? are advising home-owners that this move may lead in a significant increase in banks borrowing costs which may well lead to an increase in UK mortgage rates.

A spokesperson at Which? has commented saying that downgrades could lead to speculation which may cause a further increase to lenders rates.

Lack of competition has meant UK banks have been able to take advantage and increase their mortgage rates, overdrafts and loans. Already this year over a million home-owners have seen annual mortgage repayments rise by over £300 million due to lenders SVR rises.

The Government's funding for lending is welcomed but critics say that safeguards need to be in place to make sure banks pass on the cheap credit in the form of improved rates.

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