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Three major UK mortgage lenders have hiked their interest rates, signalling an end to the recent trend of falling mortgage rates.

HSBC, Barclays’ lending arm the Woolwich and internet and telephone bank first direct all said they were passing on recent increases in the cost of borrowing to customers.

The move brings to an end recent falling mortgage rates since the credit crunch first struck.

Rates have been steadily reducing since July, helping push the average cost of a two-year fixed-rate mortgage down to its pre-credit crunch level, as lenders once again competed for business. But wholesale funding costs have soared during the past week following the recent financial turmoil across the globe.

Two-year mortgage swap rates, upon which fixed rate deals are based, have increased from 5.18% last week to 5.56% on Thursday.

At the same time the three-month Libor rate, which affects the pricing of tracker mortgages, has soared from a recent low of 5.7% to nearly 6.28% – the highest level since December 2007, and the biggest differential to the Bank of England base rate since September.

Last week specialist lender GE Money, which lends under the First National and iGroup brands, announced rises of up to 1.6%, while smaller lenders, such as Yorkshire Building Society, have also increased the cost of most of their deals.

Now that some of the major mortgage lenders have also increased their rates, other lenders are expected to follow in the next few days.

HSBC is increasing its fixed-rate deals for borrowers with just a 10% deposit by 0.3%. It is also introducing a new loan to value tier of 75% on its fixed rate range, and it is cutting rates on these deals by 0.2%.

The group justified its decision saying that mortgages for lower risk borrowers with larger deposits were cheaper to fund than those for people who did not have as much money to put down.