Homeowners must 'act quickly' for best fixed-rate mortgages

Mortgage borrowers on variable rates who are considering switching to a fixed-rate mortgage should get their skates on if they want to catch the cheapest deals, mortgage brokers are warning. Although the Bank of England announced yesterday that the base rate will stay at a historic low of 0.5% for the 22nd consecutive month , swap rates – the interest rates at which banks lend money to each other and on which fixed-rate deals are based – have risen for two-, three-, five- and 10-year terms in the past week and stand at their highest point since last April. Mark Harris, managing director of mortgage broker Savills Private Finance , said this indicates that banks expect the base rate to rise, and that when current fixed-rate deals run out lenders will have no choice but to bring out higher fixed rates. "There has been a significant shift upwards in the last week and a couple of lenders have withdrawn their fixed rates with others expected to follow. It is perhaps too early to indicate a trend, but nonetheless borrowers who are sitting on the fence need to pay close attention." Clare Francis, site editor at moneysupermarket.com , said: "With inflation remaining stubbornly above the government's 2% target, pressure is mounting on the Bank of England to start increasing interest rates and a growing number of economists think base rate will go up in the first half of the year. "This will obviously affect those with variable rate mortgages, and anyone worried about higher mortgage repayments should consider locking in to a fixed rate to protect themselves from future interest rate increases. There is no time to lose because fixed-rate mortgages are beginning to get more expensive." Francis said someone with a 25-year term £150,000 repayment tracker mortgage at 2.17% will currently pay £648 a month. A 0.25% increase in the base rate would see their repayments rise by £19 a month. However, if the base rate climbs by one percentage point they would be paying £725 a month – an increase of £77. Both Savills and moneysupermarket.com highlighted mortgages fixed for two years at 2.69%, and for five years at 3.89%, from First Direct as potential best-buys (loan-to-value ratio 65% with a booking fee of £999 and £99 respectively). RBS/ NatWest have a five-year fix at 3.95% (50% LTV, £699 booking fee), while Northern Rock has loans fixed at 2.88% for two years and 4.09% for five years (70% LTV and £995 booking fee).