Mortgage rates rise despite lenders' cost savings
Monday, 31 January 2011 3:05 PM
Britain's banks are being accused of kicking customers while they are down, by ditching their cheapest home loans in favour of higher interest rates, despite signs that their own borrowing costs are coming down.
The Daily Telegraph has reported how, following last week's news of the economy's downturn in the final quarter of 2010, five-year swap rates – which banks charge when lending to one another – dropped from 2.89 to 2.76 per cent.
Though they recovered the next day, leaping back up to 2.93 per cent, analysts have predicted they will soon fall again, due to further dips in consumer confidence.
In spite of the decreased wholesale rate, the UK's largest mortgage lender, Halifax, increased its rates last week – for the third time in less than a month.
Other firms to have pushed up their prices include HSBC, Yorkshire Building Society and First Direct.
David Hollingworth, of London and Country Mortgages, told the newspaper that lenders had been anticipating a rise sooner than they had previously expected, which he said could have led to increased swap rates.
"In fact, last week’s numbers pushed back the potential for a rate rise coming very soon and the markets edged back a little," he added.
"Swap rates have levelled up and we could see them edge further down this week. But there is a much bigger disconnect now between swap rates and fixed rate mortgage rates, whereas back in 2007 the margin was very narrow."
The expert went on to say that there had been an increased number of enquiries about fixed-rate home loans, as borrowers anticipate a rise in Bank of England rates.
Want to be the first to know when we break a story? Follow @AboutProperty on Twitter.
