The average price of a two-year fixed rate has broken the 7% barrier as money market rates continue to rise, according to Moneyfacts.co.uk.
Borrowers looking to fix repayments for a longer period of five years are also facing high interest rates of almost 2% above the Bank of England’s base rate.
Moneyfacts.co.uk’s latest figures suggest the average two-year fixed rate mortgage is now charging an interest rate of 7.02%.
Darren Cook, mortgage expert at Moneyfacts.co.uk, says the rising cost of fixed rates is tied to recent developments in the money markets.
“This increase is a result of the two-year swap rate reaching 6.52% last week. Any increased cost to lenders in arranging the funds on the money market is passed on to customers,” he explains.
“Lenders are also taking an increased margin on top as they price their products for risk.”
Cook also revealed average standard variable rates (SVRs) have risen to 7.02%, the same cost as a fixed rate deals.
The average cost of a five-year fixed rate has also risen, up to 6.82%, as secured lending on property becomes more risky.
However, many lenders are no longer charging product fees to move to SVR, making it an attractive option for many borrowers who may struggle to remortgage in the current climate.
This week, swap rates have fallen to 6.36% and Cook is hopeful that this trend will continue, but says it is vital for lenders to pass on the savings to struggling borrowers.
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