Lenders raise fixes for the second time in a fortnight

Published 23rd Jun 2009

Nationwide and Barclays increase the cost of fixed-rate mortgages by up to another 0.7 percentage points
James Charles

Nationwide Building Society, the UK's third biggest mortgage lender, is raising the cost fixed-rate mortgages for the second time in two weeks.

Interest rates on some mortgage deals from Nationwide will jump by half a percentage point from tomorrow. Woolwich, the mortgage brand of Barclays, also said it will push up its fixes by up to 0.7 points.

Nationwide is increasing more than a third of its rates less than a fortnight after it hit borrowers with an across-the-board hike in the cost of fixed-rates of up to 0.86 points.

The average increase by the mutual tomorrow will be 0.23 points. However, a five-year fixed-rate deal for borrowers with a 25 per cent deposit has jumped from 5.48 per cent to 5.98 per cent.

Woolwich is introducing new fixed-rates tomorrow after pulling deals earlier this month. A two-year "Fix and Track" fixed-rate deal for customers with a 20 per cent deposit has gone from 5.29 per cent to 5.99 per cent.

The lender blamed rivals for its decision to push up mortgage costs. A spokesman for Woolwich said: "In light of our competitors moving their rates upwards in the last few days, we have seen a massive demand for our mortgages, and so in order to control the flow of business we have had adjust our mortgage range in line with the market place."

A spokeswoman for Nationwide said: "We are tweaking certain rates in response to other lenders and to manage volumes of business."

The average cost of a two-year fixed-rate mortgage from 4.74 per cent a week ago to 4.92 per cent today.

The decision by Nationwide to push up the cost of its most popular mortgage deals a fortnight ago caused a wave of rate increases by other lenders.

Halifax and Abbey, Britain's biggest mortgage lenders, Cheltenham & Gloucester, Royal Bank of Scotland and Northern Rock and a number of smaller building societies have all hit borrowers with a sharp rise in borrowing costs.

Borrowers who can put down only a small deposit were hit by Britannia Building Society, which raised its best-buy five-year fix for borrowers with only a 10 per cent deposit by 0.9 points last Friday. The two-year fixed-rate has jumped to 5.99 per cent, with a fee of £599.

First Direct also increased its two-year fixes by half a point last week, to 3.99 per cent. The deals also have a large £1,498 fee. Its three-year fixes climbed by 0.4 points to 4.29 per cent with a £998 fee. The deals are available to borrowers with a 25 per cent deposit.

The lenders have blamed the increasing cost of sourcing wholesale funding from moneymarkets. Two-year swap rates, which dictate the cost of fixed-rate mortgages, have soared from 1.98 per cent to 2.34 per cent in the last month.

However the average margins on two-year fixed-rate mortgages are now three times higher than they were before the credit crunch struck at 2.58 per cent, according to Moneyfacts.

Source: ' times '

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