Fixed Rate Home Loans Becoming An Expensive Option
You may have heard earlier this week about how many lenders are charging customers high arrangement fees on their fixed rate mortgage and loan products, with these charges often making a dramatic difference to the overall cost of an individual’s home loan. But it is not only arrangement fees which have gone through the roof on fixed rate deals, the actual rates of interest being charged by lenders are also at the highest level they have been for the past ten years, according to a new report from the research company Moneyfacts.
Cheltenham and Gloucester are the latest in a long line of lenders to withdraw their range of fixed rate home loan products and replace them with new deals at a higher rate. The main reason for this is due to the increased cost of wholesale borrowing on the money markets. A spokesman for Cheltenham and Gloucester said that the lender was raising its fixed rates by 30 basis points and this was in a direct response to the recent increased cost of swap rates.
Two year fixed rate deals seem to be the most expensive option currently, with the average two year deal charging a rate of 6.75%, although those looking to fix their rate of interest for five years will still be paying an average rate of 6.72%. Many experts predict that it is likely to be some time before fixed rate mortgage and loan deals become cheaper once more, due to the current economic climate.
Many borrowers applying for a mortgage or loan choose a fixed rate deal because it gives them peace of mind with their monthly repayments, particularly in these uncertain times, for the initial term of the loan. However, with large arrangement fees on products and the highest rates of interest for ten years being charged, those individuals looking for a new home loan deal should really question whether or not a fixed rate is the best option.
