Yesterday was the 13th successive day that Libor - the rate at which banks lend to each other - ticked up, and it was unlucky for many. The continued rise in the cost of wholesale funding has prompted Nationwide, the UK's largest building society, to raise rates on its mortgage trackers for new customers. The move brings Nationwide's pricing into line with the rest of the sector. It is a deliberate strategy to help it slow an unmanageable number of customer inquiries, since Nationwide had been pricing below the competition.

The UK mortgage market is polarising. For those lenders able to fund new business from large retail deposit bases, such as Nationwide, Lloyds TSB and HBOS, the rise in Libor is hitting the competition and giving them real pricing power for the first time in years. But for smaller building societies, this is an especially difficult environment. They typically have to pay a spread over Libor when raising funds in the wholesale market. Almost any loan asset they now originate appears to be lossmaking even before overheads.