Mortgage rates are at their highest for 11 years, new research from Moneyfacts.co.uk has found.
The study found that, as previously predicted by experts at Moneyfacts.co.uk, the average rate on a two-year fixed rate mortgage
has broken the seven per cent barrier and now stands at 7.02 per cent.
The increase in mortgage interest rates
has come despite the Bank of England either cutting or freezing the base rate for the whole of 2008 so far, as the Monetary Policy Committee (MPC) attempts to keep soaring inflation under control.
According to mortgage expert Darren Cook at Moneyfacts.co.uk, the rate rises are a direct consequence of high inter-bank lending rates (swap rates). He said: "Any increased cost to lenders in arranging the funds on the money market is passed on to customers." Adding that, "Lenders are also taking an increased margin on top as they price their products for risk."
However, according to Mr Cook, swap rates fell yesterday from last week's high of 6.52 per cent to 6.36 per cent, he said: "We hope that this recent downturn is not short lived and trust that lenders will play a fair game by reflecting this decrease in the rates that they will have on offer in the next few weeks."
As mortgage rates continue to rise, so too do mortgaqe set up fees, costing borrowers as much as £3,000 which, combined with increased rates and deposits, is pushing many buyers out of the market.
In response, the Chancellor of the Exchequer met yesterday with the Financial Services Authority (FSA) and the Council of Mortgage Lenders (CML
) to discuss 'unfair' mortgage arrangement fees. Alistair Darling's intention is to ensure that people are not being taken advantage of by mortgage lenders.
The meeting established that Mr Darling and the FSA are in the process of discussing what a fair fee would be, although it has been reported that he has rejected the idea of a cap.
One mortgage lender that appears to have taken notice of yesterday's meeting is Abbey, which has today announced a cut in fees on its flexible mortgage deals. As of Friday fees on its flexible mortgages will be reduced by £1,000 to £1,499.