Nationwide has hit homeowners with a hike in interest rates.

Britain’s biggest building society raised rates by 0.2 percentage points on fixed-rate and tracker deals, adding £300 a year to the cost of mortgage repayments on a £150,000 loan.

Abbey is also expected to raise rates in the coming days.

Yesterday lenders raised rates on buy-to-let deals to stem a rapid surge in demand for competitive rates following the nationalisation of Bradford & Bingley.

Woolwich, owned by Barclays, has increased rates on its buy-to-let deals by up to 0.5 percentage points. It blamed an “unsustainable” rise in the number of applications from landlords seeking to remortgage in the last three days.

Bradford & Bingley was the UK’s biggest buy-to-let lender until it was nationalised by the Government on Monday.

Bank of Ireland has also increased rates on its buy-to-let products by up to 0.85 percentage points, adding £177 to the monthly repayments on a £250,000 mortgage.

In the last two weeks lenders have effectively shut the door to landlords with smaller deposits. Bank of Scotland, owned by HBOS and BM Solutions, Britain's largest buy-to-let lender, have withdrawn deals for landlords who have a deposit of less than 25 per cent.

Today BM Solutions, Britain’s biggest buy-to-let lender which is also owned by HBOS, made a second round of rate increases in less than a week as a result of the on going turmoil in the money markets.

It pushed up fixed-rate and tracker deals by 0.2 percentage points and scrapped deals. Bank of Scotland increased rates on its buy-to-let tracker deals by 0.4 percentage points. The lender cut all fixed rate deals at the beginning of the week.

Melanie Bien, director of Savills Private Finance, the broker, said: “Lenders do not want to be left exposed with too attractive a deal because they fear being inundated with business, with service levels inevitably suffering as a result.”

Lenders have raised interest rates on mortgage deals in the last two weeks after a sharp increase in the cost of wholesale borrowing on the inter-bank money markets. Three-month Libor, which dictates the cost of borrowing to fund mortgage lending, stood at 6.30 per cent today, 130 points above the base rate.

Royal Bank of Scotland has cut a third of its mortgage deals for homeowners, including a two-year fixed-rate deal with an interest rate of 5.54 per cent. Its only remaining two-year fix has a rate of 6.79 per cent.

Coventry Building Society is also set to increase rates on resident and buy-to-let products on Friday.

Aaron Strutt, of Chase De Vere Mortgage Management, a broker, said: “Landlords have a diminishing range of options and are increasing desperate to find deals which aren’t too uncompetitive”.