Warning about fixed rates !!!!

Nationwide Building Society is warning home owners to ignore calls from mortgage brokers to rush out and sign up to a fixed-rate mortgage.

'Think twice before you rush to get a fixed rate mortgage' 

 

The dilemma for home owners over whether to fix their mortgage sooner rather than later intensified last week. Higher than expected inflation numbers raised the prospect of an interest rate rise before the summer, with economists expecting more increases to follow before the year was out.

But Chris Rhodes, Nationwide's product and marketing director, warned that mortgage brokers had the incentive of their fees to urge borrowers to fix. Business for many brokers has been tough, with the number of mortgages taken out at low levels.

Mr Rhodes said the decision to fix was not clear-cut. "Churning mortgages gets them [brokers] a fee," he said.

Lenders price fixed-rate deals according to so-called swap rates, which are the rates at which banks borrow in the market – these loans are not priced directly on Bank Rate. Over the past few weeks the market has been factoring in rate rises and so swap rates have risen. Consequently fixed-rate mortgages have become more expensive.

If Bank Rate does rise, so will swap rates, and mortgages will become even more expensive.