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Fixed Rate Mortgages Start to Rise
Despite the Bank of England holding interest rates at 0.5% earlier this month, for the fourth month in a row, fixed rate mortgages are starting to rise.
Many fixed rate mortgages at three or five year deals are above 5% and 6%, including those offered by lenders wholly or partially owned by the Government.
Tony Rice of Bedfordshire-based specialist mortgage brokers, TMP Mortgage Zone, said: "A lot of the rises are down to lenders attracting too much demand and applications, and therefore raising rates to hopefully damp down demand. Borrowers have been more interested recently in fixed rate mortgages as it is widely expected that interest rates will rise at some point. So people who may have benefitted from being on tracker rate mortgages when interest rates were falling are looking to fix their costs now at the best rates they can for 3-year, 5-year or even longer deals, so they don't get 'caught out' when interests rates start heading on the way up."
However, because no-one knows how quickly or how high interest rates will rise, as long as interest rates remain at 0.5%, then people on tracker mortgages or standard variable rate mortgages continue to pay a lot less per month than someone borrowing the same amount today on a new fixed rate deal.
"The problem then," continues Tony, "is that when the Bank of England does begin to look like it will raise interest rates, the interest on fixed rate deals is of course going to increase further too - so an unattractive 6% rate today, might look like a very attractive rate to be on in 3 years' time."
Borrowers who would like to review the options open to them if they are looking for a new mortgage or remortgage, should always contact a whole of market, specialist mortgage broker such as TMP Mortgage Zone who can provide them with access to thousands of products from all the high street and many specialist lenders, as well as help them ensure the mortgage deal they choose remains affordable for the duration of the loan.
[ 23-07-2009 ]
