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Fixes hit 10-year high as swap rates rocket

Mortgage lenders are raising two-year fixed rates to a 10-year high in response to swap rates soaring to nearly 6.5 per cent.

This week has already seen Nationwide and Cheltenham & Gloucester increase rates on their range of fixed rate mortgages while Abbey and Royal Bank of Scotland made changes last week.

The two-year swap market was at 6.49 per cent at the beginning of this week compared with 5.84 per cent at the start of the month.

John Charcol senior technical manager Ray Boulger says: “This is probably the highest that swap rates have been since the beginning of the century. The only thing that is surprising is that lenders did not increase rates sooner as there was a huge increase in two-year swaps last Monday when they went up by 30 basis points.”

Nationwide has increased its two-year fixed rate for remortgages to 6.75 per cent and upwards with a £599 fee and 7.15 per cent and upwards with no fee.

The Mortgage Practitioner sole trader Danny Lovey says the volatility is due to the increase in yields in the treasury market.

He says: “The short ends of the market have really taken a bashing and the mortgage market is a victim of it. It is no good news for any buyers.”

eMoneyfacts mortgage expect Darren Cook says: “With lenders having to pay such a huge price to secure funds and a lag of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better.

“If the economic climate persists, it is not unreasonable to predict that we may see a situation where a higher proportion of borrowers are on their lender’s standard variable rate rather than on an actual mortgage deal.”


Highly charged arguments

The survey, in conjunction with Financial Express, found that 40 out of 65 highcharging funds failed to beat their benchmark, with 26 recording bottom-quartile performance over three years.


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