With high expectations that the Bank of England are poised to raise the rate of interest, many lenders are beginning to withdraw their fixed-rate mortgage packages in anticipation, with critics saying that lenders are giving homeowners with large mortgages less chance of protecting themselves.
This week the UK inflation rate rose to 3.1%, higher than expected, and with higher interest rates expected, mortgage lenders will be passing that cost on to borrowers There has been a good choice of products below 5%, but around twelve lenders have withdrawn their entire range and replaced with more expensive offerings. The Alliance and Leicester range has risen on average by 0.3% and more lenders are expected to follow.
About 60% of home owners have fixed rate deals, which has always been the most popular way to manage and pay interest on their properties as it protects borrowers against changes in the rate of borrowing. Lenders claim to have acted because customers have rushed to buy fixed-rate deals and drained the available funding for mortgages, but critics claim that lenders are simply worried about their profit margins and believe lenders had plenty of cash left to lend but now can put it back on the market at a higher rate and make an easy profit. Not only that but critics also claim that lenders are increasing their fees; the average customer pays £900 in entry and exit fees, compared to £300 ten years ago.
Many fear that the interest rate could top 6% by the end of the year with watchers advising consumers, especially those on a tight budget, to act now and find a good fixed rate mortgage mortgage before they all disappear.
Gordon Brown has long championed fixed-rate mortgages mortgages as he believes they bring stability to the housing market and would like to see lenders offering fixed deal over longer periods, like ten to twenty five years, so that home owners know what they are likely to be paying.
