Good news for borrowers, the price of fixed cost mortgages fell in the month of July. The average interest rate fell from 6.6% to 6.3% for those with at least a 25% deposit.

Most lenders have been cutting their rates recently in an effort to attract new custom after business stagnated for most of the past year. This includes all the main high street lenders and several smaller, independent operators.

But the figures disguise a picture that is more complicated. While shorter term fixed rates have fallen, longer term fixed rates and rates for those with smaller deposits have in fact risen.Borrowers looking to fix their home loans for five years, and with just a 5% deposit, are paying more, up from 7.13% in June to 7.14% in July.

It is interesting to note that the standard factors which usually determine the rates at which mortgage rates are set, including bank base rate, swap rates and Libor rates are all much lower than this time last year, yet the rates on offer are much higher.

This reflects the panic in financial institutions about exposure to risk due to continuing sub-prime losses being revealed here in the Uk and in the US.

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