The Bank of England’s policy of quantitative easing has so far not improved the availability of mortgages. This is the verdict from mortgage experts that came as the Monetary Policy Committee yesterday voted to keep interest rates on hold at 0.5 per cent and stayed its hand on releasing more funds into the money markets.

The Bank extended the quantitative easing programme — or printing money — by £50 billion to £125 billion in May, and plans to drip-feed it into the economy in £25 billion monthly instalments. An estimated £80 billion has already been gobbled up but has so far not been passed on to homeowners in the form of more competitive mortgage deals, according to brokers — an outcome that was one of the aims of the policy.

Instead, the cost of borrowing has started to creep up for everyone, as lenders have increased their most popular fixed rates in line with higher swap rates, which determine the cost of bank borrowing on the money markets, largely as a result of the increase in government bond yields.

Ray Boulger, of the mortgage broker John Charcol, says: “There is no evidence whatsoever that the quantitiative easing that has so far gone into the system has had an effect on mortgage availability. It raises the question of where the money is going. You would have expected to see some influence by now.”

Although many borrowers are enjoying historically low interest repayments because of base-rate reductions, those with little equity and first-time buyers have not benefited. Brokers had hoped that quantitative easing would by now have improved lending to these individuals. Some lenders have nudged up their loan-to-value limits on their best deals from 60 per cent to 70 per cent to make them available to more borrowers. However, a need to restrict the volume of business and protect margins is understood to be behind the decision not to further improve rates.

Evidence of the lack of impact that quantitative easing had up to April came from the Bank itself this week. It reported that net lending to individuals increased to £1 billion in April, higher than the £0.6 billion increase in March but still below the previous six-month average.

Boulger says: “With no slack in the amount of mortgage funding available and lenders currently having no ability to easily increase the amount of money they have available to lend, the only ways they can restrict demand are the time-honoured methods of putting up their rates or withdrawing products.”

The typical rise, adding up to 0.3 percentage points to fixed-rate deals,comes despite the widely held view among economists that the Bank of England is not likely to raise the base rate for some considerable time.

Melanie Bien, director of Savills Private Finance, an independent mortgage broker, says: “Swap rates have been rising in the past few weeks, which means higher pricing on fixed rates, particularly longer-term deals. Lending criteria are still tight. There has been some easing on loan-to-values, with lenders such as Abbey and Alliance & Leicester offering their best rates to those with 30 per cent to put down rather than 40 per cent, but this is still a significant sum to find. Lenders have not really regained their appetite to lend.”

Abbey and Alliance & Leicester, both part of the Santander Group, raised some of their fixed rates this week, even for borrowers with 25 per cent equity or more, while Woolwich withdrew some of its most competitive deals from the market.

There remains a handful of super-low rate fixes, but borrowers should move fast to take advantage. Market Harborough Building Society is offering a two-year fixed rate at 2.89 per cent for homeowners with a 25 per cent deposit, for a fee of £1,594. For a borrower with a £130,000 capital repayment mortgage, repayments on this deal would come to £609 month.

But if you look at the best five-year fixed-rate on the market, from HSBC, you start to see the effects of anticipated rises in borrowing costs. Monthly repayments on this deal — a 4.39 per cent five-year fixed rate, would be £714, and you would still need a deposit of 25 per cent, or £32,500.

For first-time buyers and other borrowers with smaller deposits, fixed rates have remained punitively high, as we illustrate below. The best that someone with a deposit of 10 per cent, or £14,300, paying for the same £130,000 loan could get is a 4.99 per cent two-year fix from HSBC, which comes with a £1,499 fee. Monthly repayments would come to £759.

Trackers are about 1 percentage point cheaper, but borrowers taking out these deals face future rate rises. Jonathan Cornell, of First Action Finace, says: “If borrowers want to fix their mortgage, the time to act is now — delays will be costly.”

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