Page last updated at 15:11 GMT, Tuesday, 16 June 2009 16:11 UK

More fixed-rate mortgages go up

Santander's brands are the latest to raise the cost of fixed-rate deals

More big lenders have increased the cost of their fixed-rate mortgages for new borrowers.

The Abbey, the UK's second biggest mortgage lender, has put up the cost of its fixed-rate deals by between 0.25% and 0.5%.

Lloyds banking group has also made some of its fixed-rate deals more expensive.

The trend started last week when the Nationwide building society raised the cost of all its fixed-rate home loans by up to 0.86%.

The main factor behind the changes has been the increasing cost of swap rates.

These are the fixed rates at which banks and building societies borrow money from each other, for specified periods of time, to fund these particular mortgage deals.

"Swap rates have increased substantially in May and June and in particular last week," said Nici Audhlam-Gardiner, director of mortgages for the Abbey and the Alliance & Leicester, both run by the Spanish bank Santander.

"Following competitor moves and further swap rate increases, it has become necessary to increase the rates on some of the deals we offer," she added.

Going up

Other lenders which have taken similar steps recently are the Woolwich (part of Barclays), Northern Rock, Cheltenham & Gloucester (part of Lloyds) and the Halifax (also now part of Lloyds).

Fixed-rate deals have become very popular again in the past few months.

During April 69% of all new home loans were at fixed-rates, according to the Council of Mortgage Lenders (CML).

With the Bank of England's Bank rate still at a record low of just 0.5%, the expectation is that the official cost of borrowing can only go up when it is next changed. Some suggest therefore it may now be a good time to fix the cost of a home loan.

"People thinking of taking out a fixed-rate should not delay, but should move as quickly as possible," said Melanie Bien, of mortgage brokers Savills Private Finance.

"I think rates will go higher still."

According to the financial information service Moneyfacts, the average cost of a two-year fixed-rate loan, for someone with a 25% deposit, is currently 4.28%.

For borrowers who can only put down a 10% deposit the average rate is higher at 6.06%.

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