Rates on two-year fixed mortgages top 7%
by Gill Montia
New borrowers taking out two-year fixed-rate mortgages now face paying interest at over 7%.
According to Moneyfacts, the financial information website, rates on this highly popular type of home loan are at their highest since February 1997.
Five years ago, two-year fixed mortgage rates were around 4% and the increase means that the monthly cost of repaying an average £155,000 loan has risen from £517 in 2003 to the £907 faced by new borrowers today.
Homeowners coming to the end of their fixed-rate deals in the weeks ahead may even opt for lenders’ standard variable rates which currently average 7.02%, according to Moneyfacts data.
A report in the Financial Times at the weekend warned that a sharp rise in the cost of borrowing on the money markets had fuelled concerns that rates on fixed mortgages could see further rises in the next few months, with some brokers predicting that fixed-rates could continue to rise until the end of the year.
Interest rates on fixed mortgages are determined by money market swap rates and the fact that these continue to rise is an indication of the direction that traders expect interest rates generally to take over the period of the fix.
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