Rates for five-year fixed mortgages are beginning to rise again, with experts warning that further rises should be expected, with borrowers seemingly running out of time for the cheapest deals.
HSBC, which had decreased its rate to a record-low 1.99 per cent recently, has now pulled that offer. Like many other lenders, Coventry Building Society has increased its rate, from 2.19 per cent to 2.39 per cent. The lowest available five-year fixed rate mortgage is now 2.14 per cent.
These increases are due to lenders not being able to access funds which are as cheap as they had been up until recently. Mortgage rates mainly depend on banks having access to cheap funds, borrowing money at ‘swap rates’ on the money market. However, after a long time of falling rates, they have begun to rise again.
In the middle of April, swap rates had dropped to 1.46 per cent, before rising to 1.73 per cent, before the latest value of 1.66 per cent.
“Lenders have been cutting rates to the bone but higher swap rates will start to feed through. People assume that Bank Rate won’t rise for some time, but many don’t realise that other factors such as volatility in Europe can also affect swap rates,” said David Hollingworth of London and Country.
Competition had been causing lenders to cut their rates in a bid to attract buyers, but they will now be looking at making changes to their prices.
