Fixed-rate mortgage furore

Wednesday, 16 January 2008 12:02

The average cost of a fixed-rate mortgage increased last month - prompting anger towards lenders who failed to adjust rates following the base rate cut.

According to data unveiled by price comparison website moneysupermarket.com, the average fixed rate deal has climbed from 7.3 per cent in early December to the current 7.31 per cent.

It's a far cry from the 7.05 per cent the government had hoped for, said the website, if the full 25 basis point cut was put into place by lenders.

Fixed-rate deals account for seven out of every ten new mortgages being taken out, raising fears the bulk of the nation is likely to be worse off.

And the news comes a week after prime minister, Gordon Brown, blasted lenders for their lack of action on standard variable rates (SVR), which make up a small part of the mortgage market.

According to the Council of Mortgage Lenders (CML), 73.3 per cent of mortgages taken out in 2007 were fixed-rate deals while 3.4 per cent were SVR.

However, the 1.4 million borrowers coming off fixed-rate deals in 2008 will find their mortgages reverting to the SVR if they do not remortgage.

Louse Cuming, head of mortgages at moneysupermarket, said information showed unless borrowers are classed as low-risk a new fixed-rate mortgage would cost the average borrower more.

"I shudder to think what would have happened to the average fixed-rate mortgage if the Bank of England hadn't cut rates," she said.

"Many homeowners who waited until after the interest rate cut to get a fixed-rate deal will be worse off, much to their annoyance," Mrs Cuming added.

• Tags:
• fixed rate mortgage
,
• news