Nationwide hikes cost of fixed-rate mortgage rangeAll Nationwide fixed mortgages facing increases

12 June 2009

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five-year fixed-rate deals by between 0.2% and 0.5%, while a number of other smaller lenders have either repriced or withdrawn their ranges of the products.

Last week, the WoolwichBarclays' lending arm, withdrew its three-year fixed-rate mortgages and increased the cost of its two-year home loans by 0.3%.

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

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.