Swap rate decline not reflected in fixed-rate mortgages
New research by Moneyfacts has shown that mortgage lenders have not dropped the interest on fixed-rate deals, despite a drop in swap rates funding costs.
The interest on fixed-rate mortgages is still high despite a recent reduction in the cost of funding swap rates, according to new research.Carried out by Moneyfacts, the study showed that typical two-year swap rates are now at 2.04 per cent, while fixed-rate mortgages are still being offered at an average of 5.18 per cent, indicating a discrepancy of over three per cent.
Although some mortgage lenders, such as Cheltenham & Gloucester and Nationwide, have dropped the rates on their fixed deals accordingly, Barnsley and Chelsea building societies and the Post Office all increased theirs in the past month.
Moneyfacts said that borrowers would be paying less on a tracker mortgage at the moment, but claims that many are being put off them due to the expectation of a rise in the base rate, which could push up repayments suddenly.
Michelle Slade, spokesperson for Moneyfacts, said: "Borrowers looking for a new mortgage deal are continuing to pay a heavy price for previous mistakes made by lenders. Margins continue to be increased as lenders look to repair dented balance sheets.
"Normal rules where lenders pass or decrease rates based on the cost of funding seem to have well and truly gone out of the window," she added.
With many households on a fixed-rate mortgage seeing their term come to an end in the autumn months, one expert recently advised switching to a standard variable rate (SVR) deal.
Writing for This Is Money, Neil Simpson said fixed-rate mortgage customers should ignore any letters from lenders advertising similar deals to take up after their term ends, as SVRs can offer more for their money at the moment.
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