Figures show the cost of a fixed-rate mortgage is continuing to rise despite lenders being charged lower wholesale funding rates.

According to financial information group Moneyfacts.co.uk, the average cost of a two-year fixed-rate mortgage has gone up from 4.67% charged on the loans at the beginning of June to 5.18% now.

Swap rates, which are used to determine fixed-rate deals, rose steeply in the second quarter of the year causing lenders to hike the cost of their deals during June to reflect their own higher funding costs.

But since their recent peak of 2.51% on June 11, two-year swap rates have fallen to 2.04% now, but lenders have not passed on the change to borrowers, leaving the margin on the average two-year fixed-rate deal at 3.15%.

Fixed-rate mortgages are in high demand at the moment as buyers look to sign up to a fixed deal before the Bank of England base rate starts to rise again.

Figures from the Council of Mortgage Lenders show 74% of all mortgages taken out during May were fixed-rate ones.

Data released by the Bank of England also shows a rise in the cost of fixed-rate products, with figures showing the average cost of a two-year fixed deal increased by 0.49% during June to stand at 4.47%.

However, for buyers looking to secure a deal for five years the increase is even higher.

The average five-year fixed-rate has risen by 0.63% to average 5.56%, the highest level since the end of October last year when the base rate was 4.5%.

Borrowers wanting to take out a tracker mortgage however, have seen the rates they pay fall to a new record low of 3.81% during June, down from 3.99% in May.

Interest rates are also causing problems for savers who are only being offered an average return of 0.16% for a branch-based instant access account.

Tax-free ISA rates also remained at a low of 0.41%, while the average notice account paid a miserly return of just 0.23% at the end of June.

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