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Fixed-rate mortgages set to rise
10.06.09
The cost of fixed-rate mortgages looks set to increase as lenders pass on a rise in wholesale funding costs to borrowers, experts warned today.
Swap rates, which are used to fixed-rate deals are based, have risen sharply since the middle of last month, and this is expected to trigger a round of re-pricing among lenders in the week ahead.
The move will be bad news for people looking to remortgage or buy a home, as around two-thirds of borrowers are opting for fixed-rate loans to take advantage of the current low borrowing costs before interest rates start to rise again.
Ray Boulger, of mortgage broker John Charcol, said: “On Monday we saw another sharp rise in swap rates, large enough to be the straw that breaks the camel's back. I expect several lenders to increase the cost of at least some of their fixed-rate mortgages over the next few days.”
Two-year swap rates have soared from 1.98% on May 14 to 2.48% on Monday, although they have since eased back slightly.
The rise comes at a time when lenders have increased the margins they charge on fixed-rate mortgages due to the increased risk of borrowers defaulting on their debt.
