Nationwide, Britain’s second largest mortgage lender, is raising the cost of some of its mortgages by up to half a percentage point – just a month after it cut rates to lure in new customers.
The lender, which is also the country’s biggest building society, said fixed rate mortgages would rise by between 0.25 and 0.50 per cent from Monday following a steep increase in money market rates.
That will take its most expensive fixed rate to 7.85 per cent – on a two-year fee-free loan for remortgages of 90-95 per cent of the property’s value.
Nationwide will also increase tracker rates by 0.20 per cent, in a move that takes its two-year tracker to up to 6.85 per cent, 1.85 per cent above the Bank of England base rate.
The changes come almost a month exactly after the lender cut the cost of some of its fixed rate loans by up to 0.30 per cent.
That had been possible due to falling swap rates, which are used to price fixed rate lending.
But Melanie Bien, a director of independent mortgage broker Savills Private Finance, said: ‘‘Swaps have since jumped following the Bank of England’s gloomy inflation outlook which means that interest rates are unlikely to fall anytime soon.
‘‘Indeed, the next move may be upwards.Borrowers who see a rate they like the look of should move quickly to secure it.’’
Nationwide’s move is just the latest in a string of rate changes among Britain’s lenders as they vie to navigate liquidity problems and attract less risky customers.
Thousands of mortgage products have been withdrawn from the UK market since the credit crunch took hold earlier this year.
Lenders have scrapped cheap fixed-rate deals, introduced higher-rate products, cut the maximum amount people can borrow in relation to the property value and tightened their criteria.
More recently lenders lowered some rates to boost competitiveness and increase market share in the face of the credit crisis that has seen the mortgage market shrink considerably. But now many rates are again on the up.
Matthew Carter, divisional director for mortgages at Nationwide, said: ‘‘As a building society we always aim to offer our members the best possible deals.
‘‘However, we have seen continued large rises in money market rates together with further competitor activity and as a result it has been necessary to increase the rates on our range of mortgages,’’ he said.
‘‘While markets remain volatile we can expect to see frequent changes to fixed rate mortgages across the industry.’’