Fixed-rate mortgage at 10-year high

The average cost of a two-year fixed-rate mortgage has broken through the 7% barrier, a financial information group said.

Homeowners wanting to take out a two-year deal can now expect to pay an average of 7.02% - the highest level for more than a decade.

The move follows last week's steep increase in swap rates, upon which fixed-rate mortgages are based.

The news comes as Barclays' lending arm, the Woolwich, announced it was raising rates on its residential and buy-to-let mortgages by up to 0.6%.

The average rate of a two-year fixed-rate mortgage has increased from 6.75% at the beginning of last week and from 6.61% at the start of the year, according to Moneyfacts.co.uk.

The latest increase pushes the average cost of a two-year fix up to the same level as the average rate for a standard variable loan.

Standard variable mortgages are traditionally seen as poor value, as they are typically around 2% higher than the Bank of England base rate, and are generally only used as a rate people revert to after a deal has ended before they remortgage to a new one.

But with most lenders not charging a product fee to people who move to their standard variable rate, compared with arrangement fees of around £1,000 for best-buy fixed-rate deals, the loans are becoming increasingly competitive.

But there are still good two-year fixed-rate deals available, with Skipton Building Society currently offering the best at 5.79% with a £998 arrangement fee for people with at least a 10% deposit.

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