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Interest rates increasing on fixed rate mortgage deals
Interest rates increasing on fixed rate mortgage deals
It’s been a good couple of years for home owners with a variable rate tracker mortgage or for those sitting pretty on a low standard variable rate deal, but there are some early signs that things may be starting to change.
The record low base rate of 0.50% has meant that some people have been paying hundreds of pounds less each month on their monthly mortgage payment whilst those looking for new deals have managed to lock in to some extremely competitive fixed rate deals for the next five years.
All good things must come to an end and it seems that even though many experts are saying that we won’t see the Monetary Policy Committee raising bank base rate until later this year, the ever growing threat of inflation and its eventual impact on rates is already starting to be reflected in some fixed rate mortgage pricing.
Lenders won’t reveal a breakdown of their lending costs or profit margins on their mortgage interest rates as this is commercially sensitive information, however their rates are impacted by movements in swap rates and these have moved quite markedly during the past couple of months.
In the first week of November last year for example, the swap rate for a 2 year fix was 1.26% and for a 5 year fix was 2.06% but today they now stand far higher at 1.73% and 2.91% respectively.
As a result of these increases we have already seen fixed rate increases from the likes of Woolwich from Barclays (increases of up to 0.41%), HSBC 2 and 3 year products up by up to 0.50%, First Direct home loans by up to 0.40% and Norwich and Peterborough Building Society by 0.20%.
To put these increases
into context, for someone with a £150,000 mortgage and 20 years still to run, an extra
0.5% on the rate translates to an additional £39 per month on their mortgage payment or
if you look at it another way, an extra £468 per year
to find from somewhere.
into context, for someone with a £150,000 mortgage and 20 years still to run, an extra
0.5% on the rate translates to an additional £39 per month on their mortgage payment or
if you look at it another way, an extra £468 per year
to find from somewhere.
The decision as to which type of mortgage is best for you will largely depend on how much flexibility you have in your monthly budget. If money is quite tight and an increase in repayments would put a squeeze on your finances, then the security of a fixed rate mortgage would make sense, however if you’ve got a reasonable amount of leeway in your budget, then a variable rate option may suit you better for now.
If it’s the fixed rate option you’re considering, then I’d recommend you make an appointment with your mortgage advisor pretty quickly to discuss your options before all the best low rate deals disappear.
Check out the latest remortgage products on Moneynet or complete a short application and let a mortgage specialist search on your behalf.
Published: 14/02/2011
The information in this article was correct at the time of publication and contains time sensitive data and links, it may not be accurate at the time of reading.