Lenders Take a Bigger Bite

Interest rates jump to their highest levels in three years

No one accused the bankers of stealing Christmas, but their decision last week was not exactly conducive to holiday cheer. Leading U.S. banks boosted the prime lending rate from 10% to 10.5%, the highest level since May 1985 and the fourth increase so far this year. For consumers who hold adjustable-rate mortgages or home-equity loans, in which payments are tied to the prevailing trend, last week's upward lurch in the prime was about as welcome as the Grinch.

Led by Chase Manhattan, bankers were responding to what they see as a relatively tight credit policy on the part of the Federal...

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