Cuts in fixed-rate mortgages are set to be nothing more than a flash in the pan or so it would seem.

That is what borrowers have been told as new information revealed that this type of mortgage is now more expensive than at any time in the last 8 years.

Last week, two of the UK's biggest lenders, Nationwide and Abbey cut rates on their fixed-rate mortgages by up to 0.3%. The rate on Nationwide's 2 year fixed rate mortgage has been cut from 6.1% to 5.95% (if you are willing to pay a £499 fee) while the fee-free option rate has been cut from 6.5% to 6.35%. Meanwhile, their 5 year fixed-rate mortgage with a £699 fee has been reduced from 6.15% to 5.85%.

Abbey is offering a similar deal for those of you able to stump up a 25% deposit at a rate of 5.75%; this is 0.17% below its previous rate.

However, Ray Boulger, of mortgage broker John Charcol, urged caution and said borrowers should not see the cuts as a sign of things to come.

This is because money market rates, (on which fixed-rate mortgages are based), had been falling on the expectation of more interest rate cuts from the Bank of England, but earlier this week these expectations were dashed by even higher inflation figures. Boulger said:

"Regrettably this is a flash in the pan. These cuts will be based on money market rates...and the Bank of England's inflation report. Unfortunately it's not the start of a trend and, worse than that, I think lenders will start putting fixed-rates up again."

Boulger said the recent popularity of fixed-rate mortgages, (which accounted for 70% of John Charcol's business last month) and a change in the outlook for tracker mortgage rates, meant the Abbey and Nationwide mortgage deals would not be around for long.

The rate cuts occur amidst new stats showing that we are paying more for short-term fixed-rate mortgages than at any time since 2000. Moneyfacts' latest information show the average cost of a 2 year fixed-rate mortgage stands at 6.64%; this means that if you take out a £150,000 mortgage, then you face monthly repayments of more than £1,000.

And that is a lot of money to most of us!

Even if you take out a best buy deal, you are paying more than you would have done over two years ago. According to Moneyfacts, the best-buy rate on a 2 year fixed rate mortgage is currently 5.75%; this compares to 4.34% in May 2006.

This means the repayments on a £150,000 mortgage have increased by £123 a month to £944, while the true cost of the mortgage over the fixed-rate period has risen by £5,256 to £15,099. If you are taking out a £250,000 mortgage, you will pay £1,572; £205 more a month.

Darren Cook, a spokesman for Moneyfacts, said it was premature to interpret the cuts by Abbey and Nationwide as the start of the upturn in the mortgage market.

"It will only be a short while before we see these rate increases filter through to the high street. Consumers are still under increasing pressure to find a suitable mortgage deal, and only this morning we have seen the number of mortgages decrease to an all-time low since the credit crunch began".

There are now just 3,847 mortgages available today, compared with 4,054 a month ago, 7,931 at the start of 2008 and 15,599 in July last year.

(Please note that articles on Money Hospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. All rates are correct at time of printing but are subject to change without notice.)

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