Remortgaging To Be More Expensive as Lenders Raise Fixed Rates

Remortgaging To Be More Expensive as Lenders Raise Fixed Rates

This past week the Bank of England left the base interest rate at 0.5 per cent which released a sigh out of the mouths of many homeowners seeking remortgage or planning to do so in the next few weeks. However, it is worth noting that despite the base rate being left the same, it doesn't mean that lenders will let their interest rate offers remain unchanged. Recently lenders have been pulling their best fixed rates offers and the average of interest rates offered has risen.

Some of those recently increasing their fixed rates or pulling them this past week for repricing include Skipton and Coventry Building Society and Northern Rock. It is expected that most others will follow suit as swap rates (the rates at which banks lend to each other and determines the price of fixed rate loans) have increased.

Banks pass along the cost of swap rates to customers, and according to Michelle Slade, from Moneyfacts, "Once a few lenders start raising rates others will follow, even if they don't need to raise fresh levels of funding. While lenders will fight for best buy positions, none want to charge significantly less than their rivals."

Melanie Bien, from independent mortgage broker Private Finance, said: "Those on cheap variable rates may wish to stay put for now, perhaps putting aside the money they are 'saving' each month to overpay on the mortgage or to use when rates do rise and mortgage repayments increase. Fixed rates are likely to continue to get more expensive as an interest-rate rise becomes increasingly imminent. So those who need the security of a fixed rate who are on a pricey variable rate should consider switching now as they are unlikely to get any cheaper."

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