The cost of fixed rate mortgage deals has continued to increase despite a fall in swap rates, according to Moneyfacts.co.uk.
Swap rates, which set the cost of fixed rate borrowing for banks, peaked three weeks ago according to Moneyfacts, but lenders have failed to pass on the cuts.
Three-year deals are the most overpriced, says David Cook, mortgage expert at Moneyfacts, with an average rate of 7.25%. Swap rates for three-year deals peaked at 6.47% on 19 June.
“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. In fact the opposite is true, with rates continuing to rise,” he says.
Two-year deals have also risen above 7%, with the average deal now costing 7.07%, despite a peak in swap rates of 6.52% on 16 June.
Moneyfacts says some lenders, including Abbey and Cheltenham & Gloucester, have cut fixed rates recently. However, Halifax has added up to 0.2% on its deals, while Royal Bank of Scotland group deals have seen hikes of up to 0.4%.
“It is an extremely worrying time for anyone coming to the end of a fixed rate deal,” says 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 £150K mortgage), equating to an additional £5,896.28 in true cost over the three years.”
Cook says lenders need to pass on swap rate cuts as quickly as they raise rates to help borrowers, many of whom are struggling financially.
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