Mortgages - Nationwide rates to go up - 02/06/2008

Nationwide building society has announced today it was increasing the cost of its fixed-rate mortgages by up to 0.3%.

The changes, which will come into force tomorrow, will wipe out some of the rate reductions made by the lender last month.

The group is increasing the rate of its best two-year fixed-rate mortgage for a homebuyer with a 25% deposit who pays a £599 fee from 5.95% to 6.25%.

The new rates by Nationwide will cost a homeowner with a £150,000 mortgage an extra £28 a month, or £336 a year. Two-year fixed-rate deals for people who do not pay an arrangement fee are also being increased by 0.3%, rising to 6.65% for buyers with a 25% deposit and 7.35% for people who put down just 5%.

Both of these are higher than Nationwide’s standard variable rate, which it calls its base mortgage rate, which is currently 6.49%. Overall, just under half of the group's fixed-rate mortgages are now higher than its base mortgage rate, including all but one of its two-year fixed-rate loans for people remortgaging. The group is also increasing the cost of its longer-term fixed-rate mortgages by between 0.1% and 0.2%. Nationwide, the UK's second biggest mortgage lender, blamed the move on a “significant rise” in swap rates, on which fixed-rate mortgages are based, during the past few weeks.

Matthew Carter, divisional director for mortgages at Nationwide, said: “Swap rates have risen significantly in the last few weeks and as a result it has been necessary to increase the rates on our fixed-rate mortgages.

“While markets remain volatile we can expect to see frequent changes to fixed rates across the industry.”

The number of mortgage products available is continuing to fall as a result of the credit crunch. There are now just 3,775 different products available across the market, compared with 15,599 at the beginning of July before the problems hit. The changes by Nationwide come as the latest statistics from the Bank of England show that approvals for home loans fell to a record low in April. The worse-than-expected figures prompted predictions that the housing market will “fall sharply” over the next two years. Records also show that mortgage approvals fell to 58,000 from 63,000 in March - 7,000 less than the 65,000 predicted by analysts.

The overall value of mortgages approved over the month was £23.8bn - below the average £26.1bn lent in the previous six months.

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