Fixed rates at their highest level for six months

With interest rates at their lowest ever level, it is tempting to forget about the rate you are paying on your mortgage.

But The Telegraph reports that the latest figures suggest the cost of fixed rate deals has risen sharply during the past six months and will continue to do so amid fears that the Bank of England will increase interest rates sooner than expected.

The cost of a typical five year fixed rate deal has reached 5.45 per cent, the highest level since August last year, according to the research by personal finance website Moneyfacts.

The average three year fixed rate mortgage has reached 5.05 per cent, the highest level since September, while a two year fixed rate deal is at 4.49 per cent, the highest level since August.

It follows a 47 per cent increase in swap rates – the rates which lenders use to price their fixed rate mortgages – from 1.35 per cent for the two year swap rate in November to 1.98 per cent today.

It is a sharp turnaround in fortunes for those looking for a fixed rate deal. In November last year, the Bank of England reported the average rate on a five year fixed rate mortgage dropped significantly to 4.86 per cent in October, down from 5.04 per cent the previous month and the lowest five year fixed rate since the summer of 2003.

Michelle Slade, a spokesman for Moneyfacts.co.uk, said: “Fixed mortgage rates continue to rise as lenders pass on the higher cost of funding to borrowers.The majority of lenders have increased rates since the start of the year, with some mortgage deals seeing rate rises of more than 0.5 per cent.Borrowers who have delayed the decision to commit to a new deal will now find themselves having to pay higher monthly payments.On a mortgage of £150,000, a 0.5 per cent increase in rate would add £42 per month to a borrower’s repayments.With no signs of swap rates starting to fall, the likelihood is that mortgage rates will rise further.Recent reports are suggesting that a base rate rise could happen sooner than previously thought.

“Any rise in base rate would push mortgage rates higher, so borrowers looking to fix their repayments should act sooner rather than later.”