Lenders have been accused of over-pricing their fixed rate mortgages following sharp increases in the cost of borrowing by some leading banks.
Some have already announced rises of up to 0.4% in their fixed rates following last week's base rate rise from 5.5% to 5.75%. More lenders are set to follow in the coming days as further fixes are likely to be pulled.
Northern Rock plans to increase fixed rates by up to 0.4% from Thursday next week, but has yet to pinpoint which products will be affected.
Abbey has increased rates by 0.3% on some fixed rate deals and on its 100% mortgages.
Halifax, the UK's largest lender, will reprice its fixed rate mortgages later this week. But mortgage experts are questioning why fixed rates need to rise at all in view of the fact that lenders' own costs for fixed rate borrowing have barely changed in the past three or four weeks.
Changes in base rate should not directly affect fixed rates because lenders get the money on the international money markets.
Here, traders lend and borrow money based on where they think interest rates will move in the future. The rates they charge each other are known as swap rates.
Once the money is raised, banks and building societies add a mark-up and lend it to homeowners.
However, on Monday, the two-year swap rates were at 6.29%. That is the same rate as on July 4, the day before the base rate rise. Looking further back, the lowest two-year swap rate over the past 20 days was 6.22% on June 27.
So the maximum increase lenders can point to is just 0.07% in that period. Fixed rates had already risen dramatically in May and June - in some cases by up to 0.7% - because the money markets were pricing in three further base rate rises when the rate stood at 5.5%.
On a £130,000 mortgage, a 0.4% increase would mean an extra £43 in monthly payments on an interest-only mortgage and even more on a repayment mortgage, though the amount depends on the rate.
Melanie Bien, from broker Savills Private Finance, says: 'Fixed rates are over-priced and people are paying a premium for certainty.
'The alternative is to track, but that carries a risk which not everyone will feel comfortable with. The real problem is for first-time buyers.'
While some lenders have dramatically increased their borrowing costs, Alliance & Leicester has upped its fixes by no more than 0.2%, with many increased by just 0.1%.
Its 5.79% fixed rate until August 2009, with a £999 fee, has only risen by 0.1% from 5.69% today. An A&L spokesman says: 'We have been able to buy money at lower rates on the money markets.'
Northern Rock spokesman John Watson says: 'Swap rates have been rising relentlessly over the past few months, and we have tried to hold our rates. But we have now looked at our position and we have had to catch up with the rest.'
The Council of Mortgage Lenders reported yesterday that first-time buyers, many of whom rely on the security of fixes, are already spending 19.1% of their income, before tax, on mortgage interest payments alone. That is the highest figure in 15 years.
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