Research by Moneyfacts.co.uk has revealed that two-year fixed rate margins are their highest over swap rates since March this year, while three- and five-year fixed rates margins over swaps have hit an all time high.
Michelle Slade, spokesperson for Moneyfacts.co.uk, said: “Competition has returned to the mortgage market, but while rates are at their lowest levels in seven years the margins taken by lenders continues to increase.
“The mortgage market remains disjointed from the swap rate market, which has traditionally been the barometer of fixed rate mortgages.
“Many providers continue to raise on balance sheet funding through premium priced longer term bonds.”
Slade added that as lenders look to reduce mortgage rates further to tempt borrowers off low SVRs, savers will suffer with increasingly low savings rates.
She said: “Mortgage approvals remain at record lows and it seems that only a Bank base rate rise will kick start the remortgage market.”
However, Moneyfacts.co.uk warned that borrowers taking out unsecured loans are seeing interest rates continue to rise and become increasingly disjointed from the Bank base rate.
Slade said: “Until banks and building societies repair their balance sheets, it’s highly likely these increased margins are here to stay.”
