Fixed mortgage rates shoot up

FIXED-RATE mortgages rocketed this week as money markets reacted to gloomy economic news, writes Vivien Goldsmith.

National & Provincial lifted its five-year rate from 7.2 to 7.75 per cent. The Halifax fix for just under five years climbed from 7.5 to 7.75 per cent.

Leeds Permanent Building Society also relaunched a new range of fixes at higher rates. The five-year rate for loans up to 80 per cent rose from 7.39 to 7.99 per cent, and the new three-year rate at 6.99 per cent is half a percentage point higher.

Charles Wycks, head of lending at Leeds, said: 'I don't think we will see any change in interest rates in the near future. The market rates were a bit too low - this is a correction. Our rates are extremely competitive because we were buying in the market a few days ago. Any new rates are going to be a lot higher.'

Yorkshire Building Society was geared up to launch a new range of fixes with cash-back offers this weekend, but withdrew them on Thursday. Andy Caton, chief economist at Yorkshire, said the swap markets were unusually volatile. 'The rises this week are the largest I have ever seen,' he said.

At the beginning of the week the five-year swap rates, which are used to price five-year fixed rates, were at 6.99 per cent. But after the disappointing inflation figures on Wednesday, they rose to 7.59 per cent, and hit 7.8 per cent on Friday. Lenders have to add a margin to these figures to cover their costs and make a small profit.

NatWest still has five-year loans fixed at 7.25 per cent. It brought out a new three-year rate fixed this week at 6.99 per cent.

Bradford & Bingley Building Society has a five-year fix at 7.5 per cent for new loans up to 90 per cent and remortgages up to 95 per cent.

Nationwide Building Society has new rates at two, three and 10 years, but nothing between. The two-year rate is 6.39 per cent, three years is 6.99 per cent, and 10 years is fixed at 8.89 per cent for loans up to 85 per cent, and 8.99 per cent for loans between 85 and 95 per cent of property value.

Yesterday, Woolwich repriced its fixed rates. The five- year went from 7.45 to 7.99 per cent, and the three-year fix at 6.95 per cent was replaced with a two-year fix at 6.99 per cent.

John Charcol has a three- year, no-fees deal with Bank of Ireland at 6.99 per cent.

David Duncan, director of residential mortgages at mortgage broker Chase de Vere, said: 'There is a lot of leapfrogging. Rates are sneaking up. But we still have some very good deals.'

It is offering four-year loans from Bristol & West's central mortgage services at 6.7 per cent and four-and-a-half-year loans at 6.99 per cent from Credit Agricole.