Fixed-rate mortgage deal hope

There is a "glimmer of hope" for fixed-rate mortgage deals, according to the latest research from analysts MoneyFacts.co.uk.

While interest rates have been high and invariably increasing on fixed-rate borrowing over the last year, the trend appears to have reached a plateau and may be about to undergo a reversal, according to the website.

The average two-year fixed-rate deal peaked at 7.08 per cent on July 11th this year - its highest level in over a decade - after swap rates peaked at 6.52 per cent on June 16th.

The delay reflects the lag time for swap rates – the rates at which banks lend to each other - to reach the mortgage market, a period of around two to three weeks.

However, this has now fallen sharply.

According to MoneyFacts the average for a two-year fixed-rate deal stood at 6.95 per cent yesterday.

More importantly Swap rates stood at 5.74 per cent – suggesting the average cost of borrowing could be about to fall further in the near future.

Several lenders, such as Halifax, Cheltenham & Gloucester (C&G), Nationwide and HSBC have trimmed their mortgage rates over the past two weeks, which has resulted in the average two-year fixed-rate dropping to the current 6.95 per cent.

Halifax, C&G, Abbey, Nationwide and HSBC - which supply the majority of overall mortgage lending - have a collective average two-year fixed rate currently at 6.76 per cent.

"There is a faint glimmer of hope the fixed-rate mortgage market is returning to some sort of normality," said Darren Cook, mortgage expert at MoneyFacts.

"New mortgage borrowers are now finally benefiting from this, as lenders pass on a string of welcome interest rate cuts on their popular fixed rate deals."

However, it may be a long way back for the market, with the Bank of England yesterday reporting mortgage approvals have fallen by 70 per cent over the last year.

"It is encouraging that, at long last, lenders are responding to the easing in wholesale borrowing costs and passing a discount on to the consumer," added Mr Cook.

"There is a sense that competition is finally returning to the fixed rate mortgage market, which will benefit the borrower."

Chris O'Toole