Halifax increases fixed-rates

Halifax has increased the cost of some of its fixed-rate home loans for new customers, effective from next week.

The UK’s largest mortgage lender has hiked rates on 18 of its 52 fixed-rate deals by 0.2%.

The move will not please the Government, which has so far committed £11.5 billion of taxpayers’ money to the bank, enabling its merger with Lloyds TSB.

The rise also comes days after the Bank of England cut the base rate to an all-time low of 1%.

Halifax says the increase has been necessitated by higher funding costs and the lender has also stressed that the majority of its product range remains unchanged.

According to financial website, Moneyfacts, the average two-year fixed-rate fell from a record 7.08% in July 2008, to 4.95% in January 2009.

However, analysts are not expecting further significant falls because fixed-rates are determined by money market swap rates, which are based on forecasts for the future direction of interest rates.

Meanwhile, aggressive cuts in the base rate have made lenders’ standard variable rates more attractive and there has been drift away from fixed-rate deals to tracker mortgages.

At the same time, lenders have been increasing their margins on tracker loans to the extent that moneysupermarket.co.uk recently warned that tracker loans are to be “handled with care”.

Research by the price comparison website shows that in October of last year, when the base rate stood at 5%, the average margin on a new tracker mortgage stood at 0.76%, whereas today’s margin is typically 2.36%.

With the base rate at 1%, lenders can still offer attractive deals but rates will inevitably rise at some point in the future and borrowers taking out a tracker loan today are being advised to prepare for higher repayments in the future.

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