Fixed-rate mortgages break 7% barrier

Average fixed-rate mortgage costs have broken the seven per cent barrier for the first time during the present market slump, according to new research.

Statistics from MoneyFacts.co.uk – which last week reported rates had hit a ten year high of 6.75 per cent - show the average cost of a two-year fixed-rate deal now stands at 7.02 per cent.

Anyone looking to fix their mortgage for five-years is also paying the price, as the average rate on offer has now increased to 6.82 per cent.

"This increase is a result of the two-year swap rate reaching 6.52 per cent last week. Any increased cost to lenders in arranging the funds on the money market is passed on to customers," said Darren Cook, mortgage expert at Moneyfacts.co.uk.

"Lenders are also taking an increased margin on top as they price their products for risk."

Swap rates are borrowing rates between financial institutions, with the most respected measure in the UK recorded by the London Interbank Offered Rate (Libor).

"The average standard variable rate (SVR) today stands at 7.02 per cent. With most lenders not charging a product fee for moving onto their SVR, this is becoming a more viable option for many at the moment," said Mr Cook.

Research from the British Bankers' Association finds the number of mortgages agreed has slumped 56 per cent over the course of the last year.

"As the rates on offer increase, so does the relative risk. More and more borrowers are likely to find the increased repayment too much to bear," said Mr Cook.

"These are continuingly worrying times for anyone coming to the end of their current mortgage deal.

"However, it seems not all is lost as there could be some light at the end of the tunnel for borrowers."

At the time of writing, swap rates have decreased from the 6.52 per cent high recorded last week; down by 0.16 per cent to 6.36 per cent.

"We hope that this recent downturn is not short lived and trust that lenders will play a fair game by reflecting this decrease in the rates that they will have on offer in the next few weeks," concluded Mr Cook.

Chris O'Toole