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Fixed rate costs rise

Thursday, July 02, 2009

Source: Catherine Deshayes

The rising cost of fixed rate mortgages continues as the average five year fixed rate mortgage hits 6.00 per cent, the highest level since 22nd December 2008...

Research from Moneyfacts.co.uk found that in the last month the average five year fixed has increased by 0.43 per cent, while the average two year fixed has increased by 0.41 per cent to 5.08 per cent. Borrowers have also seen a five per cent reduction in the number of residential mortgages available this month, with the total today standing at 1,242.

The reduction in product numbers is being felt in all LTV (Loan to Value) bands, with the exception of 90 per cent LTV deals. Borrowers with a 10 per cent deposit now have access to 21 per cent more deals than they did at the start of the month. New entrants into the 90 per cent LTV arena this month include Britannia BS, Cambridge BS, Earl Shilton BS, Leek United BS and Saffron BS.

Louis Kaszczak, Head of Moneyfacts.co.uk commented, "The demand for fixed rate mortgages continues to increase as borrowers look to fix their repayments ahead of expected rates rises. Borrowers are now gambling on when the Bank of England will increase the base rate and by how much.

Those on tracker deals or their lender's SVR are likely to be seeing significantly lower repayments at present than those available on fixed deals. There appears to be little incentive for borrowers to switch over to a more expensive deal that might only achieve longer term rewards.

Those that are looking for a new fixed deal need to act fast as the lenders continue to fall over each other to increase rates. No one seems to want to offer the lowest fixed rate deal at the moment. The only positive news is for those with a small deposit, where competition is slowly returning to the market.

Although with an average five year fix standing at 6.79 per cent for those with a 10 per cent deposit, it is debatable how many borrowers will take up these deals."

Source: www.housefund.co.uk