Nationwide hits buyers with mortgage rate rise

Published 11th Jun 2009

Nationwide Building Society, Britain's third biggest lender, is planning to raise interest rates on its most popular mortgage deals, in a move expected to force rivals to follow suit.

Homeowners are being urged to lock into a deal as soon as possible after mortgage experts warned that the size of the Nationwide's increases will force other lenders to react by hiking their own interest rates.

From Friday, the UK's biggest mutual is set to increase its five-year fixes by up to 0.86 percentage points, its two-year fixed by up to 0.61 per cent and raise its three-year fixed-rate deals by 0.26 percentage points.

Ray Boulger, of John Charcol, the broker, said: "The size of these increases suggest that Nationwide wants to reduce the amount it is lending and that will put pressure on other lenders."

Nationwide has refused to comment.

Mortgage brokers suggested that a sharp rise in borrowing costs could hit the recovery in the housing market. Melanie Bien, director of Savills Private Finance, the broker, said: "One of the things that has kept the housing market going is affordabilty. House prices have fallen and mortgages have been cheap. If mortgage costs rise it could act as a deterant."

West Bromwich, Yorkshire and Chelsea building societies have all increased rates on longer-term deals in the last week in response to a sharp rise in the cost of wholesale borrowing on moneymarkets.

Swap rates - the moneymarkets which dictate the cost of fixed-rate mortgage lending - have been climbing steepily, with two-year swaps jumping from 1.92 per cent to 2.38 per cent in the last fortnight. Over the same period, five-year swaps have also jumped, from 3.24 per cent to 3.66 per cent yesterday.

Nationwide was praised at the beginning of this week for unveiling an expanded range of mortgages for existing borrowers which are available up to 95 per cent LTV.

From today it is offering a two-year fixed-rate deal with an interest rate of 2.79 per cent for loans up to £150,000 for customers with just a 5 per cent equity stake in their home. It has a fee of £2,499, although deals with smaller fees or larger loan amounts carry higher rates of interest.

Source: ' Times '

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