Page last updated at 15:19 GMT, Thursday, 12 June 2008 16:19 UK

Fixed-rate mortgages rise again

Estate agent's window
Sales have slumped as a result of the credit crunch

The cost of borrowing to buy a house has been driven higher by a flurry of rate rises from some mortgage lenders.

At least 14 lenders have increased the cost of various fixed-rate deals during the past two days.

Among them have been big names such as the Halifax, RBS, and Birmingham Midshires, as well as several small building societies.

Mortgage brokers Chase De Vere said the average cost of a two-year deal, for a 90% loan, had now risen to 6.75%.

"Things have not been this busy with the withdrawal of deals for a month or so," said Aaron Strutt of Chase de Vere.

Popular

Figures published on Thursday by the Council of Mortgage Lenders (CML) showed that fixed-rate deals had become more popular than a couple of months ago.

In April they accounted for 59% of all new loans, the highest level seen this year.

The increased price of fixed-rate home loans since then has been driven by the increasing cost of borrowing the funds on the financial markets.

The CML warned that lenders needed not only to reflect their own higher borrowing costs, but to protect themselves in case house prices fell further.

Therefore some lenders have been putting up the cost of mortgages for borrowers who can put down only a small deposit.

But those people who want to borrow 75% or less of their property's value, and who are viewed as a much smaller risk to a lender, have, in some cases, seen the cost of new loans fall.

Yesterday, in a further example of lending criteria becoming tougher, the Abbey increased the cost of its remaining 95% mortgage, available for five years at 7.04%.

It now requires the 2,499 arrangement fee to be made up-front, rather than being added to the size of the loan.

Savings rates

The credit crunch, and the increasing difficulty of raising funds on the financial markets, has prompted many lenders to raise their savers rates to lure new customers.

Savers are one of the few groups to have benefited from the credit crunch
Moneyfacts

The financial information service Moneyfacts said rates on fixed-rate bonds were now up to 7.1%, if customers were happy to put their money away for longer periods.

"Savers are one of the few groups to have benefited from the credit crunch, with rates at some of the highest levels that we have seen in recent years, " said Rachel Thrussell of Moneyfacts.

For the first time in years all of the top six most attractive places to invest, as ranked by Moneyfacts, are accounts offering interest rates of 7% or more, she added.

The current so called "best-buy rates" for more short term savings accounts now range from 6.2% for a no-notice account to 6.56% for an account with bonuses.



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