Lenders increase margins on short term fixed rate mortgages

The cost of the average fixed rate mortgage has risen in the last month, with borrowers looking for longer term mortgages being hardest hit, according to Moneyfacts.co.uk.

It takes a number of increases to move the market average and it seems we are seeing a worrying trend of rate increases. In the last few weeks the following providers have all increased rates.

Barnsley BS
Britannia BS
Coventry BS
Halifax
Newbury BS
Principality BS
Royal Bank of Scotland (Intermediary mortgages)
Woolwich
Yorkshire BS

Borrowers with no more than a 15% deposit have been hardest hit, with rate increases of up 0.20% since this time last month.

Michelle Slade, analyst at Moneyfacts.co.uk, commented: "Borrowers hoping to take advantage of this period of low interest rates and lock into a long term fixed are going to be disappointed.

"In the last few weeks, swap rates for longer term deals have increased and this is being passed on through higher mortgage rates.

"Two year swap rates have continued their downward trend, but this is not being reflected in new mortgage rates. Lenders are in effect taking bigger margins from the more popular shorter term fixed deals.

"The best deals are still to be found for borrowers with a 40% deposit, but even these have not been immune from the increase in rates, even though the risk of foreclosure on such loans is minimal."