Mortgage blog: Time to move quickly as fixed-rate mortgages rates rise
Experts are urging borrowers to consider fixing their mortgage now as the market shows signs that the record low rates seen over recent weeks are set to come to an end. A number of major lenders have increased the cost of some of their fixed-rate products suggesting that there isn't much time to secure some of the rock bottom deals that are currently available.
Keep reading to find out why now could be the time to jump in and secure your fixed-rate mortgage.
Rising swap rates starting to push up the price of mortgages
The Financial Times reports that a number of major lenders including the UK's second-biggest mortgage provider have increased the cost of some of their fixed-rate products in response to rises in the costs of funding. Nationwide, Accord Mortgages and Precise Mortgages have increase the cost of selected fixed rates with Yorkshire Building Society set to follow suit.
The FT reports that "the increases are further evidence that the price of fixed-rate mortgage deals could have reached a bottom, as lenders respond to the higher cost of funding from the money markets".
Keith Osborne, editor of WhatHouse.co.uk, says: "Many lenders have seen the costs of funding rise over recent weeks thanks to increases in money market ‘swap' rates. Swap rates are the rates at which financial institutions lend to one another and these rates have recently risen, despite assurances from the new governor of the Bank of England that the Base rate will remain at its current level until 2016.
"Two months ago five-year swap rates were at 1.35% but now they are approaching 2%. All this means that it is costing lenders more to ‘buy' the funds they need to lend and so they are starting to pass this on in the form of higher mortgage rates."
The government's Funding for Lending scheme (FLS) is one of the main reasons that lenders have been able to keep their record-breaking deals available in spite of rising swap rates. FLS has allowed many banks and building societies to access cheap money in return for agreeing loans to households and small businesses. The FT reports that the initiative "should help stem big mortgage rate rises".
"I expect to see other lenders follow suit and raise their interest rates over the next few weeks," adds Osborne. "So, if you've been holding off and waiting for rates to hit rock bottom, now could well be the time to act."
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