16 Jan

Fixed rate mortgages rise despite interest rate cut

Fixed rate mortgages rise despite interest rate cut

Despite the Bank of England's decision to cut interest rates last month, interest on fixed rate mortgages is more now than it was at the beginning of December, moneysupermarket.com has revealed.

The price comparison site explained that interest on an average fixed rate mortgage rose from 7.3 per cent to 7.31 per cent throughout December, even though there was a 0.25 per cent base rate reduction in the last month of the year.

Although it is only a modest rise, existing homeowners and first-time buyers would have hoped that mortgage rates would actually fall following the base rate cut.

Louise Cuming, head of mortgages at moneysupermarket.com, noted: "Our data shows, on average, unless you are a low-risk borrower, a new fixed rate mortgage will cost you more.

"I shudder to think what would have happened to the average fixed rate mortgage if the Bank of England hadn't cut rates."

Over 70 per cent of new mortgages being purchased are fixed rate, meaning that banks are making quite a tidy profit by failing to reduce their average rates to 7.05 per cent, in line with government expectations.

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