THE credit squeeze tightened yesterday when Bank of Scotland (Ireland) increased the rates it will charge new borrowers by up to 0.55pc, withdrew its fixed rate homeloan products and said it would no longer pay legal fees on any mortgage products.

The lender, which operates through brokers, also said it was cutting commission levels for brokers, and would only honour mortgage offers for borrowers who had accepted loan offers by yesterday morning.

The move comes after number of other lenders, among them Ulster Bank, First Active, Permanent TSB and IIB Homeloans, also increased rates in the past few days.

However, the changes only apply to Bank of Scotland (Ireland). Halifax, the branch network of the same bank offering personal banking, is not increasing its rates, despite the impression that was being given in a caption accompanying a mortgage story in this newspaper yesterday.

The Bank of Scotland (Ireland) increases of up to 0.55pc are more than the equivalent of two rates rises from the European Central Bank.

Bank of Scotland yesterday informed brokers that it would now charge a residential customer seeking a tracker rate mortgage 5.5pc -- a hike of .55pc. Previously, the bank's cheapest tracker was 4.95pc.

The bank told brokers: "New interest rates will come into effect for all new and existing applications within the pipeline."

Mortgage brokers were dismayed that loan offers that they have made to customers in the past few days, the so-called pipeline, would not be honoured unless the offer had been accepted in writing by Bank of Scotland by 10am yesterday morning.

Simply Mortgages' Peter Bastable said: "A customer who thinks on Monday they will get a certain rate are told on Tuesday, 'Tough'. That is unprecedented."

The bank is also cutting the commission for brokers from 1.1pc to 0.7pc.

Bank of Scotland has also decided to scrap all 100pc mortgages, with the most the bank will now lend 90pc of the value of the property.

When it comes to apartments, the bank will loan a maximum of 80pc of the value, with the same percentage applying to buy-to-let properties.

The new rates do not affect existing borrowers, only those taking out new loans through brokers.

Mortgage sellers warned yesterday that the credit crunch is getting so severe that the switcher market is likely to be impacted soon.