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Thursday 25th of September 2008
September 24, 2008

Remortgagers should make haste as Libor rises


by Gill Montia
Remortgagers should make haste as Libor rises

Financial news and price comparison website, Fool.co.uk, is urging homeowners who need to remortgage, to act quickly because competitive deals are likely to disappear.

The firm has been watching Libor, the interest rate at which banks lend to one another and is predicting that mortgage rates will be on the rise again marking the end of a period when the UK’s leading lenders have been making cuts on an almost weekly basis.

According to Fool.co.uk, over the past six months Libor declined from 6% to 5.7%.

However, the collapse of Wall Street investment bank, Lehman Brothers, the rescue of insurance company, AIG, and the market turbulence that surrounded these and other related events have pushed Libor back up to 6%.

Analysts at the firm believe that cuts which have brought the typical Standard Variable Rate (SVR) down from 6.74% to 6.49% over the past six months will be reversed.

Fool’s head of personal finance, David Kuo, explains that Libor is a better guide to the costs of fixed-rate and SVR mortgages than the Bank of England’s base rate.

The latter lost its status as the benchmark for UK mortgage rates (excepting the base rate tracker) when lenders became reliant on the wholesale money markets for funding.

Mr Kuo is convinced that deals currently on offer do not adequately account for the recent rise in Libor and advises remortgagers to apply for the market leading fixed-rate loans without delay.

He adds the reminder that lenders usually allow customers to arrange a mortgage six months before they need the loan.

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