Interesting article in the Times this morning (see here) discussing the increases in fixed rate mortgages over the past week as borrowers scrambled to fix their home loans. Typical 2 year fixed rate mortgages have increased by around 0.4% over the week, to around 5.39%. This is bad news for the 100,000 to 150,000 borrowers whose much lower fixed rate deals come to an end over the course of the next month – it could end up costing them an additional £60 a month on a £150,000 mortgage. It’s still interesting though that competition in the mortgage market is so intense that the new rates don’t look expensive compared to money market rates – for example, the two year swap rate is 5.72% right now, which is a good proxy for where banks and building societies can borrow wholesale cash. So if they are then lending it out again at 5.34% (Portman Building Society) or 5.39% (Yorkshire Building Society) they are having to make up the difference somewhere else. This might be in high initial arrangement fees, or by selling additional products such as buildings insurance or redundancy protection insurance. In any case, higher home loan costs, in addition to lower real wages (average earnings growth came in at +4.1% this morning, versus headline inflation at +4.4%, in other words a real pay cut) should slow the consumer in 2007.