Lenders not reducing fixed rate mortgages

Today the average two-year fixed rate is 6.13%, compared with two-year swap rate at just 3.61%.

Before the credit crunch, the difference was just 0.10%, and although a bigger margin for risk is understandable, a 2.52% difference seems excessive.

Michelle Slade, analyst at Moneyfacts.co.uk, comments: "The average rate on fixed rate mortgages over the past few months has remained almost constant, despite the funding cost to lenders reducing significantly. Since the cut in base rate, the average fixed rate has dropped slightly but nowhere near the amount we would expect.

"Even allowing for a larger risk margin, the rate should be at least 1% lower, if not more.

"With all the current focus on tracker mortgages, fixed rates have slipped under the radar.

"Borrowers with fixed rate mortgages will be hoping these rates will now reduce significantly, so they can remortgage at a manageable level and deal with the effects of the impending recession.

"With base rate being cut borrowers are expecting to feel the benefit and they want to witness the cost of mortgages across the board being reduced. "

However there are some good deals to be had, with Alliance & Leicester currently offering a two year fixed rate of 4.49%. The only downside is that you need a 40% deposit.