Fixed-rate margins hit all time high

Margins on fixed-rate mortgages have hit an all time high, according to research by Moneyfacts.co.uk, which puts the mark-up on today’s two-year fix at 3.29%, compared with 1.28% two years ago.

The rise means that for a homeowner borrowing £150,000, repayments have spiralled by £149 per month, or £3,576 over the term of the loan.

The financial analyst’s spokeswoman, Michelle Slade, comments: “While the cost of swap rate funding stands at an all time low, the margin taken by lenders has hit an all time high.”

She adds: “Mortgage rates are falling, but only a fraction of the reduced funding cost is being passed on as lenders continue to repair their balance sheets.”

Ms Slade suggests that borrowers are paying the price for mistakes made by lenders, which is particularly annoying in cases where taxpayer help has been needed to keep lenders afloat.

Looking ahead, she suggests mortgage borrowers could see interest rates as high as 8%, if the base rate rises as quickly as it fell and lenders retain their record-high margins.

Discuss this in the Finance Markets forums

Story link: Fixed-rate margins hit all time high