Lenders failing to pass on swap rate cuts

The cost of fixed-rate mortgage borrowing has continued to increase during what is described as an "extremely worrying time" for borrowers.

Although swap rates - borrowing rates between financial institutions – peaked some three weeks ago, according to research from MoneyFacts.co.uk, lenders have thus far failed to pass on reductions to lenders.

"It is now three weeks since the peak in swap rates and we would expect to see the cost of fixed rate deals starting to fall, but this isn’t the case," explained Darren Cook, mortgage expert at MoneyFacts.

"In fact the opposite is true, with rates continuing to rise."

The average cost of a two-year fixed rate deal presently stands at 7.07 per cent, while three-year and five-year deals are priced at an average of 7.25 and 6.93 per cent respectively.

This is despite swap rates for the products peaking at 6.52, 6.47 and 6.28 per cent respectively in mid-June.

"It is an extremely worrying time for anyone coming to the end of a fixed-rate deal," continued Mr Cook.

Borrowers coming to the end of a three year fixed rate deal, looking to fix for another three years could see a £158.23 increase in their monthly repayments (on a £150,000 mortgage).

This equates to an additional £5,896.28 in true cost over the three years, finds MoneyFacts.

However, there is some light at the end of the tunnel for borrowers, with both Nationwide and Abbey cutting the cost of fixed-rate borrowing.

However, Halifax has increased rates by up to 0.20 per cent, while NatWest and Royal Bank of Scotland have increased rates by up to 0.40 per cent.

"There doesn’t appear to be any let up in the misery for borrowers," concluded Mr Cook.

"Lenders need to start playing the game fairly and pass on the cut in swap rates as quickly as they pass on the increase."

Chris O'Toole