Nationwide hikes mortgage rates

Last Modified: 02 Oct 2008
Source: PA News

The UK's biggest building society has became the latest lender to hike its mortgage rates following the recent jump in funding costs.

Nationwide is increasing the cost of its fixed-rate deals by 0.2% from Friday.

The group blamed the move on the rises in wholesale funding costs, as well as the recent mortgage rate increases made by its rivals.

Several major lenders, including Halifax, Cheltenham & Gloucester and HSBC, have announced rate hikes in the past couple of weeks, as the money markets responded to the recent financial turmoil.

Swap rates, upon which fixed-rate mortgages are based, soared by 0.4%, although they have since fallen back by 0.35%, while the key inter-bank lending rate three-month Libor rose from a recent low of 5.7% to 6.28%.

Nationwide director Matthew Carter said: "Recent market conditions mean that we have had to make some small increases to the cost of our fixed-rate mortgages.

"However, this follows a recent series of reductions to our fixed rates, so our new rates are still competitive."

A rise of 0.2% adds around £19 to monthly repayments on a typical £150,000 mortgage, or £230 a year.

The move leaves a two-year fixed-rate mortgage for someone with a 40% deposit who pays a £599 fee at 5.88%, while someone with just a 5% deposit will now have to pay 6.78%.

Nationwide said it was also launching a new offer for existing borrowers who were remortgaging with the group. For a limited period existing customers will receive a £300 discount on reservation fees of £599, while those borrowing 75% of their home's value or less will be given the same mortgage rate as new customers borrowing just 60% of their property's price.

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