Fixed Rate Home Loans…Any Takers?
We reported last week about how the average cost of a two year fixed rate mortgage had increased dramatically due, partly to expensive arrangement fees which are being added to the loan, but also to the increase in the rate of interest being charged on fixed rate home loans by lenders and we questioned whether or not fixed rate products were still good value for money. At this stage the average rate for a two year fixed mortgage deal was 6.75% and for a five year deal, the rate was 6.72%.
The latest figures which have been released this week by Moneyfacts, now reveal that the cost of a two year fixed rate home loan has gone above the 7 per cent mark, with the interest rate for such deals reaching an average figure of 7.02%. The same scenario can also be applied to longer term fixed rate deals, with the average five year deal now charging a rate of 6.82%. This is due to increased costs for lenders borrowing at wholesale rates on the money markets.
This news creates further worries for those individuals who are now coming to the end of their existing two year fixed rate mortgages and loans at particularly cheap rates. Many of these borrowers are likely to see a huge increase in their monthly repayments, especially if they opt for another fixed rate loan, where they are likely to be hit with both increased interest rates and high arrangement fees and it is expected that a large number of borrowers in this situation will find it difficult to keep up with the repayments on their home loan, as many of these individuals are already struggling to make ends meet as they are, due to the increases in the cost of living.
All these increases in costs are making the lenders’ standard variable rate mortgages seem more and more attractive, as there is no longer a large differential in rates and the standard variable deals for mortgages and loans do not tend to come with the crippling arrangement fees of many fixed rate deals.
