Money Talks: Fixed rates could soon be on the move

It's been a good couple of years for homeowners with tracker mortgages or cheap standard variable rate (SVR) deals, but there are signs that things may be starting to change.

The record low base rate of 0.5 per cent means many homeowners have been paying hundreds of pounds less each month on their monthly mortgage payment, while those seeking new deals have managed to lock in to some attractive fixed rates.

All good things must come to an end, however, and it seems the growing threat of inflation and its eventual impact on rates is now being reflected in some fixed rate mortgage pricing.

Lenders won't reveal a breakdown of their lending costs or profit margins on their mortgage interest rates as this is commercially sensitive information. But their rates are affected by movements in swap rates and these have moved quite markedly during the past couple of months.

In the first week of November last year for example, the swap rate for a two-year fix was 1.26 per cent, while for a five-year fix it was 2.06 per cent but the rates have since risen to 1.73 and 2.91 per cent respectively.

As a result of these changes we have already seen fixed-rate hikes from the likes of the Woolwich (increases of up to 0.41 percentage points), HSBC (0.5 point increases on its two and three year products), First Direct (by up to 0.4 points) and Norwich & Peterborough Building Society (up 0.2 points).

To put these increases into context, for someone with a 150,000 mortgage and 20 years still to run, an extra 0.5 per cent translates to an additional 39 per month on their mortgage payment.

If you look at it another way, that's an extra 468 a year to find from somewhere.

The decision as to which type of mortgage is best for you will largely depend on how much flexibility you have in your monthly budget. If you've got a reasonable amount of leeway in your budget, then a variable rate may suit you better for now.

If it's the fixed rate option you're considering, then I'd recommend you make an appointment with your mortgage adviser pretty quickly to discuss your options before all the best low rate deals disappear.

• Andrew Hagger is head of communications at Moneynet.co.uk