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Fixed-rate mortgage costs up, despite cut

Wednesday, 16 January 2008 8:05 AM

The average cost of a fixed-rate mortgage has increased in the UK property market, despite December's cut in rates by the Bank of England (BoE).

The Bank's monetary policy committee (MPC) cut rates from 5.75 to 5.5 per cent on December 6th last year, but this change has not been mirrored by the cost of borrowing in the mortgage market.

According to research from price comparison site MoneySupermarket.com, the average cost of a fixed-rate mortgage now stands as 7.31 per cent.

This is up from the 7.3 per cent recorded in early December, before the Bank's decision to cut rates, and well ahead of the government's expectations of 7.05 per cent.

According to the Council of Mortgage Lenders (CML) around seven in ten mortgages taken out during the last month were on fixed-rate deals, so the findings are likely to hit a large number of borrowers.

"Our data shows, on average, unless you are a low-risk borrower, a new fixed-rate mortgage will cost you more. I shudder to think what would have happened to the average fixed-rate mortgage if the Bank of England hadn't cut rates," said Louise Cuming, head of mortgages at MoneySupermarket.

"Many homeowners who waited until after the interest rate cut to get a fixed-rate deal will be worse off, much to their annoyance."

The news follows prime minister Gordon Brown's assertion at a press conference earlier this month that mortgage lenders had a "duty to take it into account" when the Bank cut its base rate of interest.

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