Lenders resist lowering fixed-rates

New research from Moneyfacts illustrates the extent to which fixed-rate home loans have resisted recent cuts in the Bank of England’s base rate.

The financial website has found that interest on the average two-year fixed-rate mortgage currently stands at 6.13% and according to the firm’s analyst, Michelle Slade, has remained almost constant during the past few months.

However, lenders’ costs of funding the loans have reducing significantly during the period and Ms Slade suggests that the current focus on tracker mortgages has meant that fixed-rates have been receiving less attention than previously.

Interest on fixed-rate deals is determined by money market swap rates and with the average two-year swap rate at 3.61%, as found by the research, consumers are paying almost double the cost to lenders.

The difference of 2.52% compares with a pre credit crisis margin of 0.10%, although Moneyfacts points out that lenders will have increased the mark up in line with today’s level of risk.

Ms Slade argues that this average margin of 2.52% should be at least 1% lower than it is and that fixed-rate borrowers need to see this reduction, so they can remortgage at manageable levels and increase their chances of surviving financially during the recession.

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