Time to fix your mortgage as the very cheapest deals begin to disappear

Posted 26 May 2015 by Nick Parkhouse

Mortgage experts are warning borrowers that they may need to act fast if they want to secure some of the record-breaking deals that are currently available in the market. A rise in 'swap rates' – the wholesale money market rates at which banks lend to each other – has pushed up the cost of borrowing and some lenders have began to withdraw their very lowest rates.

Rising swap rates pushing up the cost of fixed-rate mortgages

Some of the UK's cheapest mortgage deals are set to disappear in the next few weeks as lenders start to withdraw the record-breaking products. The Daily Mail has reported that borrowers “may be running out of time” to benefit from the very best deals as the cost of new mortgages begins to creep up.

Over the last couple of weeks the best five-year fixed-rate mortgage product has risen from 1.99% to 2.14%, as lenders face increased wholesale borrowing costs.

Five-year swap have been rising since late March and there have been sharper increases in the past few weeks. Swap rates fell to as low as 1.46% in the middle of April, but reached 1.73% in mid-May.

Despite this, lenders have continued to cut their rates to attract new business, although many are now reviewing their deals in the light of reducing profit margins. The Bank of England's latest inflation report has also affected swap rates as it anticipated that interest rates would start to rise in the middle of 2016.

Mortgage expert David Hollingworth says: “Lenders have been cutting rates to the bone but higher swap rates will start to feed through. People assume that Bank Rate won’t rise for some time, but many don’t realise that other factors such as volatility in Europe can also affect swap rates.”

Best buy five-year deal now back over 2%

According to the Mail, the current 'best buy' five-year, fixed-rate mortgage is the 2.14% deal with the Chelsea Building Society. Available to 60% loan-to-value, this has a £1,675 fee.

If you want to avoid the very large fee, Yorkshire Building Society has a rate of 2.19% with a £975 fee. The lender has also launched a range of fee-free mortgages with £1,000 cash back. These include a five-year fixed rate at 2.54%.

Click here to find out how Whathouse.com can help to find the right mortgage for you.


Click here to see your activities