Money Helpdesk: Banks expecting fixed mortgage rates to keep on rising
Interest rates have been left on hold again, so part of me thinks that there is no rush.
On the other hand, what is actually happening to fixed deals? Are they likely to become cheaper or more expensive if I wait?
MF, Glasgow
Moneyfacts savings expert Michelle Slade writes:
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Hide AdThe cost of fixed rate mortgages is determined by the swap rate money market, where banks and building societies buy and sell, literally swap, tranches of money. This allows them to exchange variable rates, like the interest they pay on savings, for fixed rate money, so that if they lend at the wrong fixed rate their risk is covered.
In recent months these rates have increased by more than 42 per cent, due to the banks expecting a base rate rise in the near future. This has meant that the cost of fixed rate mortgages has risen, despite no movement in the Bank of England base rate, and interest rates are likely to rise further.
You can still fix for five years with the Yorkshire Building Society at 4.29 per cent if you have 25 per cent equity in the property. Skipton will fix for three years at 4.68 per cent with a 15 per cent deposit. And the Newcastle Building Society will fix at 5.15 per cent for two years with a 10 per cent deposit. For more deals see the "best buy" tables on page 6).