Fixed-rate mortgage deals continue to cost borrowers more

Permalink: Fixed-rate mortgage deals continue to cost borrowers more
by Lin Freestone

Financial information group Moneyfacts.co.uk has revealed that the average cost of a two-year fixed-rate mortgage rose to 7.07% on 7 July, from 6.52% on 16 June.

Despite the fact that swap rates reached their peak in the middle of June, some lenders are still increasing the cost of their fixed-rate mortgages, citing a lower volume of business as a reason.

The Council of Mortgage Lenders considers that the normal relationship between swap rates - the price lenders pay for funds - and the cost of mortgage deals has broken down.

There is also speculation that interest rates could rise because of inflationary pressures.

A three-year fixed-rate loan has become the most expensive, with average rates for rising to 7.25%. The cost of a five-year fixed-rate mortgage is now around 6.93%.

Abbey, Nationwide and Cheltenham & Gloucester have all recently cut their fixed-rate mortgages, but other lenders including the Halifax, NatWest and Royal Bank of Scotland have raised theirs by up to 0.4%.

Borrowers coming to the end of a three-year deal on a £150,000 mortgage and wanting to embark on another three-year arrangement could face a monthly increase in repayments of more than £158. Over the three-year term of the deal they would pay an extra £5,896.28.

Moneyfacts has called on lenders to start playing the game fairly and to pass on to borrowers the reductions they are receiving in order to reduce their payments as much as they can.