Borrowers move back to fixed rate deals
The cost of borrowing to buy a house has been driven higher by a flurry of rate rises from some mortgage lenders.
At least 14 lenders have increased the cost of various fixed-rate deals during the past two days. Among them have been big names such as the Halifax, RBS, and Birmingham Midshires, as well as several small building societies.
Mortgage brokers Chase De Vere said the average cost of a two-year deal, for a 90% loan, had now risen to 6.75%.
Figures published at the end of last week by the Council of Mortgage Lenders (CML) showed that fixed-rate deals had become more popular than a couple of months ago.
In April they accounted for 59% of all new loans, the highest level seen this year.
The increased price of fixed-rate home loans since then has been driven by the increasing cost of borrowing the funds on the financial markets.
The CML warned that lenders needed not only to reflect their own higher borrowing costs, but to protect themselves in case house prices fell further. Therefore some lenders have been putting up the cost of mortgages for borrowers who can put down only a small deposit.
But those people who want to borrow 75% or less of their property’s value, and who are viewed as a much smaller risk to a lender, have, in some cases, seen the cost of new loans fall.
Last Wednesday, in a further example of lending criteria becoming tougher, the Abbey increased the cost of its remaining 95% mortgage, available for five years at 7.04%.
