Why aren’t fixed mortgages cheaper?
Experts say that the cost of fixed rate mortgages is not dependent on the Bank of England’s interest rate alone. One important factor is swap rates – the rate of interest banks charge each other for borrowing money. Since the Bank of England cut rates, swap rates have remained high mainly as a result of the credit crunch and increased nervousness among financial institutions. However, mortgage brokerage John Charcol says that because two-year swap rates have now fallen below the 5% mark, lenders are already launching cheaper rates. Katie Tucker, of John Charcol, says: “Multiple lenders including Woolwich, Lloyds TSB, Intelligent Finance and Cheltenham & Gloucester, have reduced their fixed rates by around 0.15%, yet increased tracker rates by the same amount.” Despite these cuts, Tucker says tracker mortgages still offer best value for borrowers at the moment as interest rates are likely to be cut to 5% or lower during 2008. Woolwich, which has cut its fixed rates by as much as 0.3%, s
