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Rates may rise under savings-lending link

The FSA’s push for lenders to fund more of their mortgage lending through retail savings deposits could force mortgage prices up.

Speaking on a mortgage panel debate at the Sesame symposium, Nationwide group distribution director Matthew Wyles said intense competition for deposits might mean lenders have to raise their mortgage rates or take a hit on their margins.

He said: “There is a direct correlation between savings and mortgage rates because they are broadly linked to the same metrics. Retail savings will continue to be a tremendous focus for lenders because we are getting pushed by regulators and the market to fund more of our balance sheets in the retail market. “Savers are going to see strong, ongoing competition and we expect saving rates will remain the same or improve next year. That has got to be financed out of margin, more risk-taking or higher mortgage rates.”

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