Both Abbey and Standard Life have increased interest rates on their mortgages in response to the continuing turmoil in the financial markets.

Both are the the first to pass on costs from market worries to customers. Abbey raised the interest rates of its tracker mortgages for new customers by between 0.1% and 0.2%.

Meanwhile, Standard Life said it will reprice a range of its mortgages as a result of “the current UK market volatility”.

Standard Life Sales and Marketing director, Allison Crawford said: “We have seen significant changes to the money markets in the last few months and this has increased the cost of borrowing internationally.”

Abbey’s Head of mortgages Nici Audhlam-Gardiner said: “These changes reflect moves in the market that have been experienced.

We expect that these current trends will be sustained over a significant period and that other companies will follow immediately.”

The financial markets headaches are a result of problems with the US sub-prime mortgage sector. Sub-prime means lending money to people with poor credit histories, or those on low incomes.

As US mortgage rates have risen over the past year, the sub-prime sector has seen record levels of loan defaults.

However, the world economy faces these problems as this “sub-prime debt” has been resold around the world as part of a wider debt package. So, UK banks are now loosing money.