Mortgage rates edged up during February, figures have shown

Mortgage rates edged up during February, figures have shown

Mortgage rates edged up during February but the cost of unsecured borrowing continued to fall on the back of strong competition in this area of the market, figures have shown.

Interest charged on a five-year fixed-rate mortgage increased for the third consecutive month to average 5.17%, up from 5.03% in January and the highest level since July last year, said the Bank of England.

The cost of a two-year fixed-rate deal for people with a 25% deposit also crept higher to 3.72%, a rate last seen in September 2010, as high inflation increased expectations that interest rates would rise sooner than previously expected, driving up swap rates.

The rates charged on two-year tracker mortgages for someone borrowing 75% of their home's value also increased to a five-month high, rising to 3.54% from 3.51%.

Demand for mortgages has intensified recently as people who had been sitting on their lenders' standard variable rate look to take out a new deal before the base rate rises.

The increase in demand has led to many lenders pulling their most competitive fixed-rate products, with recent research from financial information group showing that the average time a fixed-rate deal remains on the market had nearly halved during the past year, dropping from 27 days to just 14 days.

But there was better news for people looking to take on unsecured debt, as lenders continued to compete for business in this area of the market.

Interest charged on a £5,000 personal loan fell for the third month in a row to 13.46%, while rates on a £10,000 loan dropped by 0.3% to 9.17% - the lowest level for two years.

Competition in the personal loan market has been intense since the beginning of the year, with rival providers repeatedly undercutting each other to have the best-buy rate.

Typical credit card rates also edged lower during February, falling from 16.79% to 16.68%, while overdraft rates were unchanged at 19.09%.