Quoted 2 Year Fixed Rate Mortgage Rates
The fall in base interest rates to 0.5% has yet to be reflected in fixed rate mortgages. Despite continued base rates of 0.5%, commercial banks are already raising their fixed rate mortgages.
Commercial banks have been claiming that the cost of borrowing is going up for them. However, looking at the three month libor (interbank rate) this is not the case. Libor rates have actually come down quite sharply.
3 Month Libor
Note 600 base points is the equivalent to 6.0%. Current Libor rates are just above 1%
Commercial banks may also argue, interest rates are likely to rise in the future. But, as we mentioned in latest interest rate predictions, the Bank of England feels interest rates will stay low for a considerable time.
Why are Fixed Rate Mortgage deals remaining High?
- Less competition in the banking sector following merger between HBOS and Lloyds
- Banks desperate to recoup losses from bad debts and tracker mortgages with 0%
- Stagnant Housing market, making banks less willing to lend mortgages except with good profit margin
Will Fixed Rate Mortgages Become Cheaper?
Probably not. Despite base rates remaining low, the banks show little sign of making fixed rate mortgages cheaper.
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Best fixed rate mortgage deals
Data Source: Bank of England
A good article, I would put the point across that there have been some very low fixed rate mortgages available in the past few months (some as low as 2.49%). Granted the fees associatd can be high but these deals are still agvantageous to some people. The recent increase in rates is worrying though with some tough decisions ahead for people currently on variable rates.
A great article and thanks for finding all the graphs.
Whilst banks continue to rip off borrowers with their high interest rates inflation will remain very low as people will not want to spend. Low inflation wil give the Bank of England no reason to raise their rates so we will be stuck with a low Bank of England rate.
But that means notihing to borrowers as they are being charged rates which appear to have no relationship with the Bank of England rate.
The Answer? Get the Bank of England to fine the banks for not lending money which will force the banks to lend and if the rates are rubbish then we shoudn’t borrow it so the banks will keep getting fined until they lower their lending rates. Simple really.
Good article, would you recommend fixing rates soon?