It’s time to fix your mortgage as euro mayhem triggers jump in home loan costs

By Stephen Womack

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British homeowners face higher mortgage costs as eurozone turmoil feeds through to monthly interest bills.

Fears that some financial institutions will not be able to honour their debts mean that banks and building societies have to pay more to raise the money they in turn lend to homebuyers.

The Bank of England warned last week that further rises in mortgage rates were almost inevitable.

Home front: The mortgage market could be affected by funding shortages that arise due to the crisis in the eurozone.

Home front: The mortgage market could be affected by funding shortages that arise due to the crisis in the eurozone.

Brian Murphy, head of lending at the Mortgage Advice Bureau, a national network of brokers based in Derby, says: ‘Lenders are under pressure to rebuild their capital buffers and increase their profits. As their costs of funding rise, they are passing this on to consumers through higher rates.’

 

Britain’s biggest lender, Halifax, raised rates for 850,000 customers with standard variable rate loans this month. Co-operative, Clydesdale and Yorkshire banks have also raised their standard variable rate.

Bank of Ireland will be the next to act: the cost of its SVR loans rises from 2.99 per cent to  3.99 per cent from June 1.

David Hollingworth, of mortgage broker London & Country in Bath, Somerset, says: ‘You can’t fix your food bills or your petrol bills, but you can put some certainty into your mortgage bill by fixing the rate.’

The average cost of a five-year fixed-rate mortgage is 4.86 per cent, still higher than most variable rate loans.

But borrowers with at least  25 per cent equity in their property may qualify for better deals. The Post Office has a  five-year fixed rate at 3.59 per cent, for example.

 

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

The comments below have not been moderated.

et those rates up, stand back and smile as the delightful mayhem ensues. - Frank Hegarty, Farnborough, 20/5/2012 - There already is mayhem. Banks are reducing rates for BTL mortgages and raising them for homeowners and FTB'rs. The 'mayhem' being that homeowners incomes are being squeezed and FTB'rs are getting even more priced out the market. Excessive rental demand is fuelled by these things, making BTL lending even more attractive and low risk to the banks. As a result, the mortgage market continues to favour such borrowers and lenders compete. Rather a viscous circle when you look at it. Not really one I'd expect you to find particularly delightful.

Click to rate     Rating   5

TIM are you on commission? You keep flogging this dead horse with monotonous regularity. You never know this time you might be right- once out fifth-teen goes can't be bad.

Click to rate     Rating   1

TIM are you on commission? You keep flogging this dead horse with monotonous regularity. You never know this time you might be right- once out fifth-teen goes can't be bad.

Click to rate     Rating   1

I love a gamble ,but the base rate is stuck and going nowhere so enjoy your tracker if you have one because I am BTW don't renters stand out on TIM lol

Click to rate     Rating   5

It is a mystery to me why Brits want to gamble on variable mortgage interest rates, anyway. Not knowing precisely what your biggest living expense is from one day to the next creates uncertainty and nervousness and fosters a general culture of weak forward-planning that hampers the personal and corporate growth and wealth of the UK economy.

Click to rate     Rating   5

Get those rates up, stand back and smile as the delightful mayhem ensues.

Click to rate     Rating   19

Good, higher interest rates mean lower house prices.

Click to rate     Rating   4

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