In January this year, just 48% of new home loans were fixed-rate deals. But this figure shot up to 69% in April when the average fixed rate - 4.83% - was at its lowest since January 2004.
Unfortunately for those yet to make the switch fixed rates are on the up again, with big-name lenders such as Nationwide, Halifax and Abbey hiking their fixes over the last week.
Why are fixed rates going up?
Most economists now expect the Bank of England base rate's next move to be upwards. But fixed rates do not necessarily follow the base rate. Instead, they are linked to swap rates - the amount banks charge each other for borrowing and lending money over a fixed period of time, which have started moving significantly higher recently.
And lenders, never slow to pass on rate changes that benefit them on to consumers, have been quick to respond. The latest figures from the Council of Mortgage Lenders (CML) show that the number of mortgages taken out for house purchases jumped by 16% month-on-month in April.
However, this is more likely to be caused by the normal upturn in Spring and is not a great cause for optimism, given figures are still 28% down on the figure for April 2008. Halifax's housing market survey does however give cautious cause for optimism, with May's results showing a 2.6% price increase on the previous month - easing the annual rate of decline from 17.7% to 16.3%.
It is not all bad news for borrowers, though. Although fixed rate deals are increasing, several big banks and building societies have cut their variable rates in a bid to entice more custom for deals of this kind.
Which lenders have increased their rates?
Nationwide, Britain's biggest building society, was one of the first mortgage lenders to increase its fixed interest rates. Its deals rose by up to 0.86 percentage points last Friday. Rival Halifax was quick to follow suit, while Abbey is cutting its two-year tracker rates by 0.20% to 3.29% at the same time as announcing hikes to its fixed-rate range.
Under the new terms, buyers taking out an Abbey two-year fix will pay 3.98%, while those on a fee-free, three-year deal will be on 5.29%. Those remortgaging with the bank will pay 4.39% over two years, or 4.99% over three years. Cheltenham & Gloucester's fixed-rate deals are also expected to go up in price this week.
Louise Cuming, head of mortgages at moneysupermarket.com, said:
"There has been a flurry of activity in the mortgage market, unfortunately to the detriment of borrowers.
"Halifax has raised its fixed rates; Nationwide has already moved many rates up as has Chelsea building society, and the Principality building society's 10-year fix has risen from 5.19% to 5.39%.
"Conversely, however, tracker rates have been coming down, which is good news for borrowers looking for a variable-rate deal." This excerpt was taken from the introducer.co.uk website. |
