FIXED RATE DEALS UP Monday, 11th May 2009

Over the last two months,average fixed-rate mortgage deals have increased, even though the Bank of England kept interest rates at an historic low of 0.5 per cent this week and pumped a further £50 billion into the system.

MoneyFacts, the personal finance publisher, says average two-year fixed rate mortgage, still the most popular deal, was 4.87 per cent at the start of March, just before the Bank cut bank rate from 1 per cent to 0.5 per cent.

Following that, fixed rates started to come down and fell to 4.60 per cent in April, but since then have started to creep back up and yesterday were ate 4.62 per cent. They are likely to climb higher once the latest increases are taken into account.

The profits lenders were making from home loans were now the highest for a very long time, with banks and building societies putting up their rates to protect their profits ahead of the expected surge in repossessions later this year.

Lenders are creaming profits with the hardest hit being first time buyers. Those who have just a 10 per cent deposit – the case for most people trying to get on the housing ladder – have seen rates drop from 6.38 per cent to 5.97 per cent before climbing back up to 6.13 per cent.

The big worry is that fragile signs of a potential recovery in the housing market could be squashed if first time buyers are shut out altogether from buying a property.

Recentlythere have ben signs that the fall in house prices is slowing down, while there are reports that the number of potential house buyers has been increasing.

The pick up in activity is being constrained by the availability of finance for buyers, especially those with small deposits.

It is sad that rates are climbing back up. And especially hard on first time buyers.