Banks to abolish fixed-rate mortgages in bid to cut costs

Charlie Weston of the Independent wrote about the potential end of fixed rate mortgages which was covered our Mortgage Market Trend Outlook 2011 in his column yesterday

“Banks and building societies are planning to abolish fixed-rate mortgages because they are too expensive for lenders to provide, according to a leading mortgage expert.

Banks would prefer to have borrowers on products with variable rates, which can be increased whenever lenders want, according to Karl Deeter of Irish Mortgage Brokers — who correctly predicted last year’s rises in variable rates.

He said he was getting indications from lenders that fixed rates may be discontinued this year. AIB will let an existing homeowner fix for three years at rates as low as 3.89pc. This compares with a variable rate of 3.3pc.

However, the swap rates (the market rate) that banks pay for money range from 7pc for two years to 11pc for five years. “At those prices offering a fixed rate below the swap rates is nonsensical,” Mr Deeter said in a report called Mortgage Market Trend Outlook 2011.”

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