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Mortgage rates still climbing

By Matthew Plant

10 March2011

The average mortgage rate `edged up` in February, the Bank of England has revealed.

As people across the UK wait to hear what the Bank`s Monetary Policy Committee (MPC) will do with the base rate, the average rates on mortgages are rising.

For the third month in a row, the average interest rate charged on a five-year fixed-rate mortgage increased. In January, it stood at 5.03%, but last month it climbed to 5.17% - the highest we`ve seen since July 2010.

The cost of two-year fixed-rate mortgage deals also rose. Someone with a 25% deposit would have paid, on average, 3.72% in February - the highest rate seen since September 2010.

Basically, today`s high inflation means that experts are anticipating a base rate rise sooner than previously expected - and this is driving up `swap rates`.

It`s also leading more and more homeowners to look for a new mortgage deal. They may have been happy to pay their lender`s Standard Variable Rate while the base rate looked set to stay low, but all the talk of base rate rises is leading them to look for a fixed-rate deal now, before any increases are actually announced.

And the higher demand for mortgages, as a Press Association press release states, `has led to many lenders pulling their most competitive fixed-rate products, with recent research from financial information group Moneyfacts.co.uk showing that the average time a fixed-rate deal remains on the market had nearly halved during the past year, dropping from 27 days to just 14 days`.

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Tags: mortgage, mortgage rate, interest rate, fixed rate mortgage

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