Fixed-rate mortgage costs 'coming down'

Date:Monday 17th May 2010
Author: Susanna Kavka

Mortgage customers may notice that short-term fixed-rate deals are falling in cost, according to one industry expert, but he also highlighted an issue that could prove to be an obstacle in the future.

Council of Mortgage Lenders spokesperson Bernard Clarke made his comments after the Bank of England released figures showing that interest rates for such arrangements are at their lowest level since records began in 1995.

He suggested the fall is an indication of the market improving and described it as "good news for mortgage customers".

However, he added: "There is still a longer-term problem in terms of filling a funding gap that will be ceated by the removal of the various Bank and government support measures."

In his view, this issue must be addressed by banks soon, since lenders have been helped significantly with their liquidity by state actions.

Mr Clarke also described how many factors affect the rate at which financial institutions will offer loans, such as their own costs and the demand for funding.