Press
Fixed rates failing in competitive stakes
David Pawsey, MortgageAdviser Published Wednesday , July 23, 2008
Fixed rates are becoming increasingly less competitive due to lenders' funding costs, research from online mortgage comparison company Mform has shown.
Based on a £150,000 loan on a house valued at £250,000, the most competitive two-year fixed rate deal ranked forty-fifth while the most competitive three-year fixed rated twentieth, according to the website. The most competitive two-year deal was a discounted variable product and the best three-year product was a lifetime variable mortgage.
Francis Ghiloni, marketing and business development director for Mform, said fixed rate mortgages had recently dominated the market as borrowers prized security and certainty more than anything else.
He said: "The cost of security appears to be excessive and fixed rates are now uncompetitive across the board for most product areas. Even standard variable rates can be more competitive on a true cost basis.
"The credit crunch has made accessing funding for fixed rate deals increasingly difficult and uncertainty about the future of rates has made them less profitable for lenders who are now imposing high prices for the certainty they offer."
James Carter, proprietor of London-based adviser Independent James, said lenders were charging a premium on fixed rates particularly as swap rates had come down in the last few days.
He said: "Depending on the client and loan-to-value interest rates would have to increase by 0.5 per cent before trackers became less cost-effective than fixed."