Fixed mortgage rates at highest for eleven months

Published 10th Sep 2009

Interest rates on fixed rate deals are rising despite a drop in the cost of borrowing for the banks themselves


The cost of fixed-rate mortgages rose to its highest level for 11 months during August despite steep falls in wholesale funding costs, according to figures published today.

The Bank of England said that the average five-year, fixed-rate mortgage had risen from 5.68 per cent to 5.72 per cent between July and August, the highest level since October 2008, when the base rate was 4.5 per cent, compared with 0.5 per cent now.

The increase came despite a steep fall in the cost of borrowing for the banks. Five-year swap rates, upon which the mortgages are based, fell from a recent peak of 3.79 per cent on August 7 to 3.34 per cent at the end of the month.

The cost of the typical two-year fixed rate deal remained unchanged during August at 4.42 per cent, despite the cost of two-year swap rates falling from 2.37 per cent to 1.95 per cent during the month.

Tracker mortgages were also unchanged during August, charging an average rate of 3.84 per cent.

Economists have warned that mortgage rates could continue to rise for the rest of the year as lenders look to boost their margins and remain reluctant to take on

Source: ' Times '

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