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Mortgages: Fixed Rates Reach New High

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The average rate for a two-year fixed-rate mortgage is now 5.16pc after a flurry of lenders raised the cost of their deals. The increase came despite the fact that two-year "swap" rates, on which the deals are based, have continued to fall from their recent peak of 2.51pc on June 11 to 2.05pc now.

Moneyfacts, the financial information group, said the current margin of 3.11 percentage points was the highest since the credit crunch began, when it started keeping records on the figures, and may well be the highest ever.

Ray Boulger of John Charcol, the mortgage broker, agreed, saying that the differential now being charged by lenders was the highest he could remember. He added that the recent rises in fixed-rate deals meant it was no longer necessarily a good time for borrowers to take one out.

The margin charged on five-year fixed rate mortgages has also increased, rising to an average of 2.64 percentage points on a typical mortgage rate of 6.12pc.

The latest round of repricing was begun by nationalised bank Northern Rock on Friday, when it increased the cost of its five-year deal by 0.6 of a percentage point to 6.29pc. Royal Bank of Scotland, in which the Government holds a 70pc stake, today raised the cost of five-year fixed-rate loans by the same amount, although it reduced the cost of some of its trackers.

It was joined by the Post Office, whose mortgages are provided by Bank of Ireland. It repriced its entire fixed-rate range, including its buy-to-let mortgages. The group has increased rates by up to 0.54 of a percentage point, although its five-year fix for borrowers with a 40pc deposit, at 4.99pc, remains among the most competitive available.

Lenders continued to blame the price rises on a need to manage the amount of business they do, with any group offering a rate that stands out as being competitive quickly being swamped with applications.

Mr Boulger said: "Fixed-rate mortgages started to rise quite sharply on the back of swap rate rises at the beginning of June, but when they [swap rates] started to go back down, fixed rates continued to rise. Some lenders are putting their rates up in response to other lenders putting their rates up."

Fixed-rate mortgages are in high demand, with the latest figures from the Council of Mortgage Lenders showing that 74pc of all loans taken out during May were fixed-rate ones, as consumers looked to lock into low borrowing costs before interest rates start to rise again.

But Mr Boulger said: "It's no longer obviously a good time to take out a fixed-rate mortgage; some fixed rates have gone up by about 1 percentage point."

Profit taking to cover there losses, excellent.

Where can I get mortgage advice from Mr Boulger he sounds a real expert?

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Interest rates alwasy go up in the winter.....oh....hold on....what month is it?

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  • 405 Brexit, House prices and Summer 2020

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      • down 5% +
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