The cost of fixed rate mortgages has hit a six month high as a result of lenders passing on the rising cost of funding to borrowers, the latest research from Moneyfacts has revealed.
Average two and five year fixed rates have increased to their highest level since August last year, at 4.49% and 5.45% respectively, while three year rates are at their highest since last September at 5.05%. However, the increases have come at the same time that the cost to lenders of raising funding on the swap rate market has soared. Having stood at 1.35% at the end of November, the two-year swap rate has increased by 47% in the subsequent months to currently stand at 1.98%.
Michelle Slade, spokesperson for Moneyfacts, said that with no signs of swap rates starting to fall, the likelihood is that mortgage rates will rise further. "The majority of lenders have increased rates since the start of the year, with some mortgage deals seeing rate rises of more than 0.50%," added Ms Slade. "Borrowers who have delayed the decision to commit to a new deal will now find themselves having to pay higher monthly payments."
According to Moneyfacts, a 0.50% increase in the rate of a £150,000 mortgage adds £42 per month to a borrower's repayments.
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