Mortgage holders feel strain of higher rates

London property owners are reeling under the burgeoning cost of fixed-rate mortgages, new research from MoneyFacts.co.uk has shown.

With inflation at record-high levels, hopes among mortgage-holders for short-term interest rate relief had all but vanished and the majority of borrowers were opting for fixed-rate deals.

Analysts say such products typically offer greater financial security as they shield homeowners from interest rate hikes, but according to MoneyFacts expert Darren Cook the situation has now become much murkier.

With the credit crunch continuing to place a strain on global money markets, he said banks are struggling to secure funds for loans - which has in turn driven up average fixed-rate mortgage rates to a ten-year high of 6.75 per cent.

Furthermore, Mr Cook suggested the situation looks set to deteriorate for homeowners in the short-term, including people who have purchased property for sale in London.

He concluded: "With lenders having to pay such a huge price to secure funds and a lag time of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better."

Published 17th June, 2008

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