The cost of five-year fixed rate mortgages rose for the fourth month in a row in August despite a sharp decline in funding costs for lenders, according to new figures.

Bank of England data shows that the interest rate charged on one deal with a 25% deposit increased from an average of 5.68% to 5.72% during the month - the highest level since October 2008.

However, swap rates - upon which the mortgage deals are based - dropped from a peak level of 3.79% on August 7 to 3.34% at the end of the month.

Many lenders had re-priced their mortgage deals in response to the steep rises in swap rates, which translated into higher funding costs for them, during June and July.

Predictions that the base rate is likely be on hold at the current low of 0.5% for some time brought down the swap rates from their peak levels, but the reduction has not been passed on to new borrowers.

The rate charged on five-year fixed rate deals is now the highest since the average of 5.88% was reached in October last year. However, the base rate then was 4.5%.

The cost of two-year fixed rate mortgages for people borrowing 75% of their home's value remained unchanged during August at 4.42%, despite the cost of two-year swap rates falling from 2.37% to 1.95% during the month.

But despite the current high cost of fixed rate mortgages in relation to the base rate, they remain popular with consumers who are keen to lock into the deals before official interest rates start to rise again.

In June, the latest month for which figures are available, 78% of people taking out a mortgage opted for a fixed rate deal, the highest proportion for two years.

Tracker mortgages remained unchanged during August, with an average rate of 3.84%, or 3.34% above base rate, for people with a 25% deposit.

There were further hikes in the cost of unsecured borrowing during the month, with the average interest rate charged on a £5,000 loan rising from 13.13% to 13.26%, the highest level since the Bank of England started keeping figures on the product in January 2005.

There was also a rise in rates for people borrowing £10,000, with these rising by 0.3% to 10.69%, the highest level since August 2002.

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