Fixed-rate loans continue to rise in cost

Latest research from financial website Moneyfacts.co.uk shows that the cost of a fixed-rate mortgage is continuing to rise despite a fall in money market swap rates.

Swap rates determine fixed mortgage interest rates and reflect traders’ views on the direction that interest rates will take during the period of the fix.

While swap rates peaked in the middle of last month and have since declined, Moneyfacts is asserting that the cost of fixed-rate loans has continued to rise.

The firm’s spokesman, Darren Cook, explains that the average rate for a three-year fix now stands at 7.25% (up from 6.47% in June), while the average rate on two-year fixed deals has risen to 7.07% (up from 6.52% in June).

Homeowners coming to the end of three-year fixed-rate loans and looking for a similar deal could see a £158.23 increase in their monthly repayments on the average £150,000 mortgage. Over a three-year period the increase totals £5,896.28.

The Council of Mortgage Lenders has pointed out that the affect of the Bank of England’s Special Liquidity Scheme, which was launched in April to free up inter-bank lending, has yet to be felt and both Abbey and Nationwide announced cuts in rates on their fixed and tracker loans only last week.

In addition, a few fixed-rate loans below 6% are still available, although the fees on some deals offset the benefits of lower interest rates.

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