Britain’s biggest lenders came under fire for raising mortgage rates on Friday, just days after promising MPs they would try to boost lending.

The moves were branded doubly outrageous because the cost of funding mortgages fell sharply last week, as the Bank of England signalled official interest rates could soon come down to zero as the economy flirts with deflation.

Halifax, which is more than 40% owned by the taxpayer since its takeover by Lloyds and has a 20% share of the mortgage market, increased rates on a third of new deals by 0.20 percentage points, even as wholesale rates fell below 2% for the first time in history. The move even applied to some loans for borrowers with a 40% deposit.

Meanwhile, Cheltenham & Gloucester (C&G), which is also owned by Lloyds, and Nationwide raised trackers by up to 0.25% — the fourth move in a row since Bank rate began falling in October.

Cathy Neal of Which?, the consumer group, said: “Halifax and Lloyds have been bailed out with billions of pounds of taxpayers’ money so should not be limiting choice for new borrowers by increasing rates when many other lenders are cutting theirs. Lloyds is now a dominant force in the mortgage market and should be using its position to increase competition and lending, not limit it.”

Brokers expressed concern that the rate rises signalled that Halifax was retreating from the mortgage market. The move from such a big lender could spark fears of wider rate rises.

However, Ray Boulger of broker John Charcol said the general trend was still down. In a mirror image of the Halifax move, Nationwide cut two, three and five-year fixes by 0.20 points last week — its cheapest two-year fix is now 3.99%. Abbey and Northern Rock have also cut fixes.

We answer your questions.

Does Halifax’s move mean fixes are headed back up?

Probably not. Its move is more to do with the need to scale back business since its merger with Lloyds TSB to create Lloyds Banking Group. C&G also raised some rates last week. Like Halifax, it increased five-year fixes by 0.20 points. It also raised ten-year deals by 0.30 points. However, it cut some fixes by 0.20 points.

My current deal is about to expire. What should I do?

Thousands of borrowers who have come to the end of their fixed-rate deals are waiting on lenders’ SVRs — and those that have fallen along with Bank rate are as low as 3%. While this is cheaper than most fixed-rate deals, borrowers are warned not to get too comfortable as low rates won’t last forever.