Are The Worst Of Mortgage Rates Behind Us?
An eight-year peak in average fixed-rate mortgages was reached in June, but July saw several lenders cut their rates. With the Bank of England base rate having come down to 5% from its high of 5.75%, variable rates have also come down from their peak last October.
June saw an eight-year peak of fixed–rate mortgage costs, but they began to come back down again in July. Bank of England figures show that a borrower with a 25% deposit had an average fixed rate of 6.6% in June, an increase on the average 6.26% of May.
Fixed-rate mortgages have become the most popular type of mortgages, but this was their highest average rate for a month since February 2000. However, the good news for borrowers is that rate cuts by various top lenders has brought down fixed rates. Nationwide Building Society was the first to cut its rate, and Abbey, Halifax and Cheltenham & Gloucester are among those who have followed suit.
The credit crunch is very nearly a year old, and in that time banks and building societies have become reluctant to lend to each other, pushing up the cost of funding. As banks have had to pay more for their money they have pushed the cost onto consumers with higher mortgage rates, fees and put off many would-be borrowers with demand for high deposits. Six months ago, in February, the average fixed-rate mortgage was 5.74%, but the June peak was 0.86% higher.
However, since then the swap rate (one of the measures of the cost of borrowing between lenders) has come down, enabling lenders to begin to reduce mortgage rates.
Indeed some lenders have been cutting rates about once a week. This compares very favourably with the almost weekly increases in the first six months of the year.
The Bank of England base rate has more influence on variable rates than fixed rates. Since last autumn the base rate has come down from 5.75% to 5%, and the average variable rate has come down from an average of 7.74% last October to 6.92% in June.
Maybe the worst of the mortgage rates are behind us.
