Mortgage rates to increase to 7%
Mortgage rates are likely to reach almost 7 per cent by the end of 2008, and an estimated 1.4 million people are due to re-finance their mortgages this year.
The Bank of England data indicated the average rate on a two-year fixed rate mortgage limped drastically between April and May, even though the Bank lowered the base rate during April.
People with a 25 per cent deposit were being offered a mortgage rate of 6.06 per cent in April, however this took launch to 6.27 per cent throughout May.
Banks and building societies are trying to raise money to fund their customers' mortgages. This month swap rates have surged, from 5.80 per cent ten days ago to 6.3 per cent.
Property economist at Capital Economics, Ed Stansfield, commented: "If the recent rise in swap rates is sustained, two-year fixed mortgage rates could approach 7 per cent in the next few months. With demand in the market already so weak, that would represent another huge blow to the housing market outlook."
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