Fixed-rate deals hit 7%

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by Kay Murchie

Research from financial information service, Moneyfacts, has revealed that the average cost of a two-year fixed-rate mortgage deal has risen above the 7% mark and are at their most expensive since February 1997.

In addition, those looking for a five-year fixed-rate mortgage will find that the average rate on offer has now risen to 6.82%.

The credit squeeze and lack of mortgage funds has meant that mortgages have all but dried up. However, those that are available come with huge fees.

The rising cost of borrowing between lenders is being passed onto the consumer according to Darren Cook of Moneyfacts.

Furthermore, lenders are taking an increased margin on top as they price their products for risk, added Mr Cook.

Currently, the average standard variable rate (SVR) is 7.02%. This is a more practical option for many presently, as the majority of lenders are not charging a product fee for moving onto their SVR.

Over the last 12 months, the number of mortgages agreed has plummeted 56%, according to research from the British Bankers’ Association.

Meanwhile, reports show that there are just half the mortgages available compared with a year ago.

Anyone seeing their current mortgage deal ending in the near future are facing a worrying time, concluded Mr Cook.

The Bank of England’s Financial Stability Report recently revealed that approximately 1.8 million borrowers will see their fixed-rate mortgages expire this year and, as a result, could face a mortgage rise of up to £230 a month.