The margin between mortgage rates and the cost of funding to lenders through the swap rate market stands at an all time high, reports Moneyfacts.
Two years ago the margin on a two year fixed deal stood at 1.28%, compared to 3.29% today.
The increase in margin means that on a £150,000 mortgage, a borrower is repaying £149 per month more, equivalent to an additional £3,576 over the two year term.
Michelle Slade, spokeswoman for Moneyfacts.co.uk, says borrowers will be angry, especially at government backed banks such as the Royal Bank of Scotland and Lloyds banking Group.
She says: “While the cost of swap rate funding stands at an all time low, the margin taken by lenders has hit an all time high.
“Mortgage rates are falling, but only a fraction of the reduced funding cost is being passed on as lenders continue to repair their balance sheets.
She adds that interest rates could hit 8% if the base rate rises and bank’s keep up their high margins.
Slade says: “Swap rates are the traditional barometer of fixed rate mortgages, but with lenders still nervous of entering the money markets many are opting for on balance sheet funding through their savings book.
“While the margin between fixed rate savings and mortgages is lower, it is steadily increasing again.
“The mortgage rates on offer at present are typical of what borrowers expected to pay when bank base rate was higher.”