Cost of fixed-rate mortgages recedes

The cost of fixed-rate mortgage borrowing has fallen back below seven per cent.

With prices peaking at 7.08 per cent earlier this month, the highest level for over a decade, the latest news will provide some small respite for borrowers.

According to the latest MoneyFacts.co.uk survey, the average interest charged on a two-year fixed-rate mortgage deal now stands at 6.96 per cent – down 0.12 over the last two weeks.

While the average for a three year offer still stands at 7.18 per cent, five-year fixed-rate deals have fallen 0.06 per cent to 6.88 per cent.

"As swap rates increased lenders were quick to pass on their increased borrowing costs to customers," said Michelle Slade, analyst at MoneyFacts.co.uk.

"However, as swap rates have declined these same lenders have not been in quite the same hurry to bring their rates back down."

In the last week a number of lenders - including Halifax, Abbey, Cheltenham & Gloucester, Nationwide and Woolwich - have all started to reduce the rates on their fixed-rate products – allowing the industry average to fall.

Among the best offers on the market at present are a two-year fix from First Direct at 5.98 per cent, with up to 80 per cent loan-to-value (LTV) with a fee of £1,998.

For a smaller fee, £749, Market Harborough has a two-year fix at 5.99 per cent, up to 80 per cent LTV.

The number of products on offer has also continued to increase.

At the end of June there were just 3,403 products on offer; today the figure has increased to 3,887.

"However, it is too early to say that we have finally turned the corner," said Ms Slade.

"We need to see a more prolonged period of rate reduction, something which is starting to look unlikely."

Chris O'Toole