Fixed rates could exceed six month peak as swaps continue to increase

Rising swap rates have pushed the average cost of a fixed rate mortgage to its highest level in six months.

Two-year swap rates peaked at 1.98% last week, compared to 1.35% in November, representing a 47% increase.

Figures from show the average two-year fixed rate now costs 4.49%, the highest level since August 2010.

The average three-year fixed rate is 5.05%, the highest level since Sep-tember 2010, and the average five-year fixed rate mortgage is 5.54%, the highest level since August 2010.

Michelle Slade, a personal fin-ance analyst for, says: “Fixed mortgage rates con-tinue to rise as lenders pass on the higher cost of fund-ing to borrowers.”

She says most lenders have in-creased rates since the start of the year, with some mortgage deals rising more than 0.50%.

This means that borrowers who have delayed committing to a new deal will have to make higher monthly payments.

On a mortgage of £150,000, a 0.50% increase would add £42 a month to repayments, she says.

Slade adds: “With no signs of swap rates starting to fall, the likeli-hood is that mortgage rates will rise further.”

Andy Pratt, chief operating off-icer at Alexander Hall, says press coverage of an anticipated rise in the Bank of England’s base rate has led to more enquiries about remort-gaging with some borrowers switch-ing to a fixed rate for peace of mind.

But he says: “When clients sit down with a broker they realise it is perhaps better to stick with the deal they are on.

“Lenders are building in for a base rate rise before it has happened, which is a little bit naughty and over-cautious of them. I expect if there hasn’t been a rise by July fixed rates will start to come down again.”