June 13, 2008 | posted by Pam Atherton in Banking, House prices, Loans, Mortgages, Savings |

More than a dozen lenders have raised the cost of their fixed rate mortgages, further tightening the credit crunch for homebuyers.

The hikes reflect the higher cost of inter-bank lending rates, falling house prices and fears of interest rate rises before the end of the year.

The average cost of a two year fix, on a 90 per cent loan-to-value loan, has jumped to 6.75 per cent, as major lenders such as Halifax, RRS and Birmingham Midshires reprice their deals.

The Council of Mortgage Lenders says that fixed rate deals became more popular in April, accounting for 59 per cent of all new loans.

The cost of mortgages for those with only a small deposit is becoming increasingly expensive, with Abbey raising the cost of its five year fix (for those with only a 5 per cent deposit), to 7.04 per cent.

This deal  also comes with an eye watering £2,499 arrangement fee, payable upfront.

But for savers, conditions have rarely been better. Research by Defaqto’s banking consultant, David Black, shows that 13 banks and building societies are paying 7 per cent (gross AER) or more on one, two or three year fixed rate bonds, on a minimum investment of  £1,000.

Mr Black says: “It’s a rare event when fixed rate bonds paying 2 per cent above the base rate are freely available. Last year, when the base rate was higher than it is now, a handful of 7 per cent bonds were briefly offered, but these were quickly withdrawn as investors piled in. The sheer volume available now suggests that some of the current crop will be around for sometime longer.”

To compare savings rates, visit: http://www.defaqto.com/consumer/savings-accounts/term-accounts.aspx