UK mortgage rates with a longer term fixed rate are on the increase.
UK mortgage rates are currently following a trend towards longer term fixed rate deals, with the 5 years fixed rate available from a few lenders at around the 4.99 per cent mark.
Longer term fixes offer borrowers the opportunity to budget but, whether or not they offer beneficial mortgage rates depends on borrowers attitude towards risk. There are cheaper rates available on tracker deals but these are seen as higher risk and borrowers definitely seem risk averse at this point in time.
The Monetary Policy Committee has kept the BOE base rate at 0.5 per cent, but borrowers should not think that this means lenders will be complacent when it comes to increasing UK mortgage rates. Lenders rates have been slowly increasing rate in recent weeks, they may continue to rise even faster and mortgages could become more difficult to come by if the eurozone crisis worsens.
Mortgage rate increases are occurring because wholesale funding costs have risen due to fears of a eurozone collapse. The wholesale rate determines both tracker mortgage and fixed mortgage rates. The more major lenders rely heavily on the wholesale money market for their funding, and the cost for lenders to borrow new funds has risen significantly since summer 2011 due to a rise in Libor rates.
So far increases to lenders rates have not risen to such significant levels as to discourage those planning to buy a new property and mortgages remain historically cheap. Nevertheless, borrowers can't afford to hang around as UK mortgage rates will increase and the cheapest deals will not be around forever.
