Nationwide is raising the cost of its entire fixed-rate mortgage range following recent steep increases in wholesale funding costs.
The group is increasing its fixed-rate deals by an average of 0.2%, but some loans will see their rates jump by up to 0.86%.
The move follows steep increases in swap rates, which fixed-rate mortgages are based upon, during the past month, with the cost of two-year swaps recently seeing one of their biggest jumps for 10 years.
Other lenders could follow
Nationwide’s decision is expected to kick-off a round of re-pricing as other mortgage lenders follow suit and raise the rates they charge to reflect the new higher funding costs.
Yorkshire Building Society has already increased its two-, three- and five-year fixed-rate deals by between 0.2% and 0.5%, while a number of other smaller lenders have either repriced or withdrawn their ranges of the products.
Nationwide’s five-year fixed rate
The biggest increase to the Nationwide range is being made to its five-year fixed-rate loan, which will rise by 0.86% to 5.84% from Friday June 12 for customers looking to borrow up to 60% of their home’s value. However, rates will not rise so sharply for customers who are looking to borrow more than 60%.
Two-year fixed-rate mortgages are being increased by up to 0.61%, while on some three-year products rates are going up by 0.26%.
The 2.79% rate for existing customers with only a 5% deposit who pay a £2,499 fee is also being increased to 2.99%, despite only being launched on 10 June.
Swap rates to blame
Andy McQueen, mortgage director at Nationwide, said: ‘Movements in swap rates have meant that we have reviewed our pricing of fixed-rate mortgages.’
The group also said that the increases on individual products were being made to manage the mix of business the group does.
The rises are bad news for consumers, with figures from the Council of Mortgage Lenders showing that 69% of mortgages taken out during April were fixed-rate deals.
There are also fears that steep rises in mortgage rates could dent the current signs of recovery in the housing market, as part of the renewed interest from buyers is thought to have been triggered by lower borrowing costs.
To see if you could switch to a better rate, use the Which? mortgage finder to compare hundreds of home loans instantly.
© Press Association 2009
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