Banks put up fixed-rate mortgages

Markets senses base rate could rise

Homeowners looking for a cheap fixed-rate mortgage deal can expect to pay more for their home loans, despite the Bank of England's decision to keep interest rates on hold.

The vast majority of lenders have now increased the costs for borrowers, from smaller lenders such as Norwich & Peterborough to larger lenders like Halifax, Abbey National, Woolwich, and Cheltenham & Gloucester.

Fixed-rate mortgages are priced according to future interest rates which are set on international money markets.

As predictions change, it affects so-called Swap rates, and this then knocks onto what the lenders can offer.

However, not all lenders have actually moved prices up.

Chelsea building society and the Alliance & Leicester are two lenders that have recently reduced the cost of their two year fixed-rate mortgages.

Rate predictions

Nationwide, the UK's largest building society, was one of the lenders to put up interest rates on Friday.

So we may yet see fixed-rate drop back. We will just have to wait and see David Hollingworth, London & Country

It has increased its two-year fixed rate mortgage from 3.59% to 4.09%.

A Nationwide spokesman said: "I think there has been a change in sentiment regarding both the UK and global economy - increasing consumer confidence has led people to believe that the next move in general interest rates will be up, even if that may not be until next year."

It is not just two year fixed rates that are increasing in price.

Five year deals are also going up.

Scarborough building society, for example, was offering a 3.89% five year deal, but it was withdrawn on Friday, and has yet to be replaced.

David Hollingworth of London & Country, a Bath-based mortgage broker, said the trend may not last.

"We saw this happen a few months ago. There was quite a lot of re-pricing and then it settled back down. So we may yet see fixed-rate drop back. We will just have to wait and see."

Mortgage rates have also started to rise in the United States on the expectation that interest rates will soon rise.