Ray Boulger of John Charcol forecasts that fixed rate mortgages are set to get more expensive in the coming months due to a sharp rise in swap rates.

Swap Rates allow lenders to borrow funds to lend at a fixed price over a set period - usually up to 10 years. These rates are then used to set the interest rate to fixed rate mortgages. Swap rates will be pushed higher if yields on the safest debt - government gilts rises.

Mr Boulger writes: 'Today saw another sharp rise in gilt yields at the short end of the market, although there was a marginal fall in yields at the long end. The yield on 2 - 4 year gilts rose by around 0.15%, with the obvious knock on effect on swap rates, some of which rose even more.

'The recent lows for swap rates were on May 14, the day after the publication of the Bank of England's Quarterly Inflation Report, when 2 year swaps closed at 1.98%, 3 years at 2.49%, 5 years at 3.14% and 10 years at 3.80%.

'Thus in just 3˝ weeks 2, 3, 5 and 10 year swap rates have risen by a massive 0.50%, 0.62%, 0.62% and 0.44% respectively and this at a time when the Bank of England's Quantitative Easing programme is meant to be driving down yields.

'Following such a sharp rise in swap rates here in the UK I expect several lenders to increase their rates for fixed rate mortgages over the next few days, but there is no reason to expect tracker rates to increase as 3 month Libor is still slowly edging lower and at 1.25% the margin of 0.75% over Bank Rate is the lowest it has been for several months.

'With most borrowers currently choosing a fixed rate mortgage, if interest rates continue to rise the current recovery in the housing market, which is based primarily on much improved affordability as a result of the combination of lower house prices and lower interest rates, is in danger of being snuffed out.'