Money Insider: Are mortgage rates about to rise again?

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The Independent Online

it has been a fantastic couple of years for people on variable rate tracker mortgages, or those on a standard variable rate of less than 3 per cent, but there are some early signs that things are starting to change.

The record low base rate of 0.50 per cent means some customers have been paying hundreds of pounds less each month on their mortgage repayments, while those looking for new deals have managed to lock in to some extremely competitive fixed-rate deals.

All good things must come to an end and it seems that even though many people are saying we will not see the Bank of England's Monetary Policy Committee raising the base rate until later this year, the ever-growing threat of inflation and its eventual impact on interest rates is already starting to be reflected in some fixed-rate mortgage pricing.

Lenders will not reveal a breakdown of the lending costs or profit margins on their mortgage interest rates because this is commercially sensitive information. However, their rates are affected by movements in swap rates, and these have moved quite markedly during the past couple of months.

In the first week of November, for example, the swap rate for a two-year fix was 1.26 per cent and for a five-year fix was 2.06 per cent. Today the rates stand far higher – at 1.79 per cent and 2.91 per cent, respectively.

As a result of these increases we have already seen the likes of the Halifax, Skipton Building Society, the Co-operative Bank and Britannia raise interest rates by up to 0.30 per cent on some fixed-rate deals. The latest inflation figures were announced on Tuesday and they didn't look pretty. With Consumer Price Inflation (CPI) now running at 3.7 per cent and heading towards twice the Government's target of 2 per cent, the days of the ultra-low base rate strategy may well be numbered.

With CPI at this level, a basic rate taxpayer needs to earn 4.625 per cent gross on their savings to maintain their spending power. Apart from locking their cash away for five years in a fixed-rate bond with Coventry BS at 4.75 per cent, or a long-term fixed rate Isa, this simply isn't achievable.

Life for savers is, therefore, tough. This week, however, Coventry BS launched a new savings account paying 3.05 per cent. The internet operated eNotice Account pays this rate on balances of £1,000 or more and includes a bonus rate of 0.50 per cent for the first 12 months.

The best feature of this deal is that you can access your cash as long as you give 30 days' notice, which is a much better offer than some one-year, fixed-rate bonds where interest rates are substantially lower.

Pick the best plastic for a foreign trip

the specialist pre-paid currency card provider, Fairfx, is changing its tariffs from 1 March. The point-of-sale charge on the Fairfx Anywhere Card will fall from 1.5 per cent to 1.4 per cent but a new £1 ATM withdrawal fee will be introduced.

It is hard to decide which of the many currency cards is best, but a credit or debit card could prove a cheaper holiday option. For example, Halifax's Clarity Credit Card does not charge fees for cash withdrawals from foreign ATMs or loading fees on purchases. Neither does the Sainsbury's Finance Gold Card, although it has a £5 monthly fee. However, it does come with annual family travel insurance, including winter sports, for two adults and up to six children.

Other cards worth considering are Metro Bank's debit and credit cards, which have no foreign ATM or purchase fees, and the Santander Zero credit card, again with no foreign ATM or purchase fees but available only to holders of Santander current accounts, investments or mortgages.

With some debit cards charging up to £9 on every £200 withdrawn from an ATM overseas, it is worth doing your homework now and sorting out a new card in plenty of time for your next trip abroad.

Andrew Hagger is an analyst at

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