Fixed Rates Rise Again
Nationwide has raised its fixed mortgage rates as other lenders have done so in the wake of recent financial turmoil. Borrowing has become tougher, especially if you don’t have a large deposit.
Nationwide is increasing its fixed-rate mortgage rates by 0.2% as from today. The biggest building society in the UK blamed the increases on wholesale funding costs as well as recent mortgage hikes by other lenders.
As the cost of inter-bank money has risen in reaction to the financial crisis around the world, so Halifax, HSBC and Cheltenham & Gloucester have raised their rates in recent weeks.
Fixed rates for mortgages are based on swap rates, which initially went up by 0.4%, but have dropped back by 0.35%. The inter-bank lending rate Libor has risen from a recent low of 5.7% to 6.28% this week.
Nationwide’s director said that although they had had to raise the fixed rates, this followed a number of recent reductions, so their rates were still competitive.
For a typical £150,000 mortgage an increase of 0.2% will add around £19 per month to repayments, or £230 over a year.
If you have a 40% deposit, then with a £599 fee you can get a rate of 5.88%. However, if you only have a 5% deposit the rate is much higher at 6.78%.
The building society also said that it was bringing in a new offer for existing borrowers who stay with Nationwide to remortgage. Existing customers will get a £300 discount on reservation fees of £599. For those borrowing 75% or less of their home’s value, Nationwide are offering the same mortgage rate as for new customers borrowing at 60% of property value.
These rate rises come after a period since July when mortgage rates had been falling, as lenders began to compete again for business.
However, the recent deepening of the financial crisis has led to a forecast that banks will cut back on lending once again, as the economic outlook becomes bleaker. Lenders have already reduced the amount loaned in September, and the number of loan defaults has increased.
Better news is that a Bank of England base rate cut is possible next week, which would help banks consider reducing variable mortgage rates.
