Rates on the rise again

Mform.co.uk is predicting a lender U-turn on the recent rate cuts in the coming weeks.

The mortgage website says lenders are coming under pressure to raise rates on fixed rate deals following a sharp rise in interbank lending rate LIBOR which has increased by more than 1% in the wake of the global stock market meltdown.

Rates on longer term fixed products have already started edging up but mform.co.uk says increases will feed through to popular two and three-year deals.

Mform.co.uk says the best two-year deals rated on true cost start at around 5% and come from the Yorkshire, Abbey and Lloyds TSB.

It says rates on best buy mortgages had fallen by an average of nearly 0.5% in the past six weeks but that the collapse of investment bank Lehman Brothers, the rescue deal for insurer AIG and the share price plunge at HBOS have dramatically changed sentiment.

Eamonn Rice, chief executive of mform.co.uk, says: “Just when it looked like there was light at the end of the tunnel we are now heading back to a period of rising mortgage rates.

“Borrowers whose applications are already being processed need to keep in touch with lenders and ensure they receive the rate they have applied for. People who are considering fixed rates should if possible start applying now.”