Cost of fixed rate mortgages increasing

June 21, 2009 by Brendan O'Neill

News

In the last couple of weeks, several major mortgage lenders have increased the cost of their fixed rate mortgages.

New borrowers are likely to find they will have to search harder or use a good mortgage advisor to find the best fixed rate deal for their circumstances.

The Nationwide was the first to increased its fixed rate mortgages by up to 0.86 per cent. The UK’s second largest lender, the Abbey, has increased its fixed rate deals by anything from 0.25 per cent to 0.5 per cent; Lloyds has followed suit and increased the interest rates on some of its fixed rate deals.

The reason cited for these increases has been the increasing cost of ‘swap rates’. This is something that those on CeMAP training or CeFA training courses will learn about and is the rate at which the mortgage lenders, both building societies and banks, lend money to each other to fund mortgage deals.

The Director of Mortgages at Alliance & Leicester and the Abbey, Nici Audhlam-Gardiner, both owned by Santander, the Spanish banking group, said:

“Swap rates have increased substantially in May and June and in particular last week. Following competitor moves and further swap rate increases, it has become necessary to increase the rates on some of the deals we offer.”

These are not the only lenders to increase their rates. Others include the Barclay’s Woolwich, Halifax and Cheltenham & Gloucester (both of which are owned by Lloyds now) and Northern Rock.