Fixed rates begin their ascent

The much forecast rise in fixed rates is well underway with Abbey announcing that it has put up the cost of its fixed-rate mortgages by between 0.25% and 0.5%.

Lloyds banking group has also increased the cost of some fixed-rate deals via its Cheltenham & Gloucester and Halifax brands.

The lenders are following a trend set by Nationwide last week when the building society raised the cost of its fixed-rate home loans by up to 0.86%.

Fixed-rates follow money market swap rates which have risen sharply in recent weeks, reflecting analysts’ predictions for the future direction of interest rates.

For some time now mortgage brokers have been urging homeowners to fix as rates are thought to have bottomed out.

Research from Abbey shows that in May, 60% of homeowners preferred the idea of a fixed-rate loan, on the basis that it could offer protection from future rate rises.

Twenty-one per cent of homeowners keen to fix said they would opt for a two-year deal, although the number of borrowers opting for a ten-year fix had doubled since the beginning of the year.

Last week, new figures from the Bank of England revealed that the cost of five and ten-year fixed-rate deals increased last month, although the average two-year fixed rate at 75% loan-to-value ratio fell, from 4.02% in April to 3.97% in May.

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