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Fixed rate mortgage costs increase despite interest rates status

16/01/2008

Even with interest rates being reduced in December 2007, the total charge of a fixed-rate mortgage is increasing suggests moneysupermarket.com.

This online website gives customers a chance to compare mortgage deals and one customer confirmed that the cost of an average fixed-rate mortgage deal had increased from 7.3 per cent 1-month ago to 7.31 per cent.

Many borrowers on SVRs had made up a little proportion of the market during 2007, this 3.4 per cent compared to the stunning 73.3 per cent of homeowners who had a fixed-rate deal in 2007. This estimation was brought up by the Council of Mortgage Lenders.

Senior technical manager, Ray Boulger at broker John Charcol commented: "The price of fixed-rate mortgages is determined by swap rates, which is the long-term rates at which banks lend to each other.

"As there has been a lack of liquidity of funds since the credit crunch, swap rates have been high, but in the last month have fallen by around 0.5% - two-year swap rates are now at 4.94%, which means that fixed rate mortgages will follow."


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