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Expensive fixed mortgages only option for many

Expensive fixed mortgages only option for many

Category: Mortgages

Updated: 18/12/2008
First Published: 18/12/2008

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Fixed rate mortgages now account for 69% of the market, compared to 51% this time last year.

Despite a 2.61 percentage point drop in the two year swap rate between 1 October and today, the average two year fixed rate mortgage has only dropped by 0.71 percentage points.

The margin between the cost to the lender on the swap rate market and the rate at which they are offering mortgages to borrowers continues to increase. This time last year the gap was 1.12 percentage points, today it is 2.92 percentage points.

Michelle Slade, analyst at Moneyfacts.co.uk, comments: "By not reintroducing cheaper tracker mortgages to the market, the lenders are leaving borrowers with little option but to go on to more expensive fixed rate mortgages.

"It is evident that lenders are continuing to increase their margins, despite a fall in the cost of funding.

"Affordability is a key issue for borrowers, who prefer fixed rate mortgages as a way of stabilising their monthly outgoings and could be a secure option to weather the storm of the imminent recession.

"Borrowers expect to pay a slightly increased price to fix their mortgage repayments compared to tracker deals. However, today the gap between the average two year fixed and tracker mortgage stands at 1.16%, compared to just 0.14% this time last year.

"It would appear that all lenders are adopting a similar approach, despite calls from the Government to pass on cuts to borrowers."

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