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Mortgage rates 'could increase'

By Jonathan Dawes, Wed 24 Sep 2008 - Published in Mortgages

Mortgage rates are set to increase after a climb in the interest rate which banks lend to each other, it has been claimed.

According to personal finance website Fool.co.uk, the London Interbank Offered Rate (LIBOR) took six months to fall from six per cent to 5.7 per cent, but has increased back to its original level in four days.

Furthermore, the organisation notes that the standard variable rate for mortgages fell as LIBOR did - leading to speculation that it will now increase in line with it.

David Kuo, head of personal finance at the website, commented: "LIBOR is a better guide to the costs of fixed-rate and standard variable rate mortgages than the Bank of England base rate.

"However, mortgage rates currently on offer do not adequately account for the recent surge in LIBOR."

Mr Kuo recommended that people whose fixed-rate mortgages are due to end find another deal as soon as possible, before rates begin to rise again.

Recently, Andy Smith, managing director of 1st Asset, suggested now is a good time to buy property for people with cash savings or who are looking to take out small loans.