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Rising UK Fixed Mortgage Interest Rates

Housing-Market / Mortgages Aug 06, 2014 - 12:45 PM GMT

By: MoneyFacts

Housing-Market

The ill-fated Government Funding for Lending Scheme was withdrawn from the retail market in January this year, and Moneyfacts can reveal that average interest rates on the popular five and two-year fixed rate mortgages have started to escalate in response. However, at the same time, the lesser known three-year fixed rate has continued to fall.      


The average rate for a two-year fixed rate mortgage, while still lower than it was in August 2012 when FLS was introduced, has risen since January from 3.52% to 3.81%, which is an additional £23.55 pm, based on a £150,000 mortgage. 

Five-year fixed rates are worse still, costing £24.11 more per month than in January.

Sylvia Waycot, Editor at Moneyfacts.co.uk, said:

“FLS continues to weave its misery even after its withdrawal, only this time it is potential mortgage borrowers that will feel the pain as average rates rise on two and five year fixed rates. 
                                                    
“Bearing this in mind, it is even more alarming to find that the average rate on the less well known three-year fixed rate mortgage continues to fall from 5.02% in August 2012 to just 3.79% today. 

“This means that attractive deals are still available, but borrowers need to look beyond the overtly marketed deals.   

“Three-year fixed rate deals can easily be overlooked as they tend not be the norm or readily marketed, and yet they are as viable a product as any two-year deal.

“There is no obvious reason that springs to mind why the three-year fixed should be lower priced than the two or five-year equivalents. In fact, all logic suggests that two and five-year fixed rates should be cheaper because the turnover of products is greater, the competition is greater and the majority of borrowers looking at fixed rates as an option are fixated on only two and five years.     

“The less charitable may suggest that it is easy to hide the best rates in under-promoted products, knowing that the focus can be steered to the more profitable lines without too much effort.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


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