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Fixed rate mortgages too expensive, expert states
Thu, 13 Nov 2008
Lenders are not cutting the cost of fixed rate mortgages despite the fact it is now cheaper for banks to borrow from one another, according to one expert.

Michelle Slade, analyst at Moneyfacts.co.uk, explained that the average two-year fixed rate mortgage is currently 6.13 per cent, with the two-year swap rate - the rate at which banks lend to each other - at 3.61 per cent.

Before the credit crunch the gap between the two was 0.1 per cent, she stated.

Ms Slade said: "Since the cut in base rate, the average fixed rate has dropped slightly but nowhere near the amount we would expect."

Even if mortgage lenders are pricing in a bigger risk margin, the gap should be no larger than one per cent at the very most, she added.

People will be hoping the gap narrows so they are able to remortgage to a good deal, Ms Slade believes.

Meanwhile, James Caldwell, director at Fairinvestment.co.uk, has said that the re-introduction of tracker mortgages by some banks is a good thing for the mortgage market .

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