Cost of fixed rate mortgage reaches 10 year high

Darren Cook, mortgage expert at Moneyfacts.co.uk, comments: "Latest research from Moneyfacts.co.uk shows that today the average two year fixed rate stands at 6.75%, the highest rate we have seen in the last 10 years. Customers looking to fix their mortgage for five years are also paying the price as the average rate has increased to 6.72%.

"The curse of Friday 13th bought more pain for borrowers as swap rates reached a new high of 6.49%. With lenders having to pay such a huge price to secure funds and a lag time of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better.

"Many borrowers prefer fixed rate deals, particularly in today's economic climate as they struggle to keep outgoings under control. However, many are likely to find this increased cost too much to bear. With the average two year variable rate standing at 6.66%, many are finding they have little choice.

"If the current economic climate persists, it is not unreasonable to predict that we may see a situation where a higher proportion of borrowers are on their lender's SVR, rather than on an actual mortgage deal.

"With lenders such as ING Direct (UK) having an SVR as low as 5.64%, this isn't bad news for all customers. If the Bank of England maintains its current base rate level, or indeed drops it further, the lender's SVR rates will become increasingly attractive.

"Many lenders are realising that their SVR is a more viable product option in today's market and as such, lenders including Royal Bank of Scotland, Woolwich, Halifax, Lloyds TSB and Cheltenham and Gloucester have all stopped offering their SVR to new customers.