Nationwide hikes mortgage rates just weeks after cutting them

Nationwide Building Society is increasing mortgage rates by up to 0.20 percentage points, just over two weeks after making a series of cuts to its home loan costs.

The news follows warnings from property experts that mortgage offers below 4 per cent could soon disappear.

Nationwide, the country’s largest building society, said it had to raise its mortgage costs because of increases to swap rates.

One of the largest mortgage price hikes an increase of 0.20 percentage points on a five-year fixed rate remortgage deal with a 40 per cent deposit.

It was priced at 3.99 per cent on 15 February but now costs 4.19 per cent, with a £999 fee.

End of the road: Mortgage prices could be set to rise as banks start to bake in price hikes

The fee-free version of the same product has gone up from 4.18 per cent to 4.39 per cent.

Its first-time buyer five-year fixed rate with a 40 per cent deposit and a £999 fee has increased by 0.10 percentage points to 4.24 per cent, and its home mover mortgage with the same terms has increased the same amount.

Just last month Nationwide unveiled a series of cuts to its mortgage rates of up to 0.7 percentage points.

Today’s rises have mostly been on loans with larger deposits, and most of the cuts to lower-deposit products remain.

Nationwide director of home Henry Jordan said: ‘Over the last few months, we have continued to lower rates across our mortgage range, including doing so four times this year.

‘However, given the recent increase in swap rates, we are having to make some small increases on selected mortgage rates this week so that we can continue to balance our support for all types of borrowers with the need to ensure our rates remain sustainable.’

What is next for mortgage rates?

Mortgage rates reached peaks not seen for some years in the wake of September’s mini-Budget, with the average two-year fix topping 6.5 per cent in October.

While rates have come down since then, it is likely that the price of new fixed-rate mortgages will rise again over the short term.

That is because swap rates are increasing, and these help set the price of fixed-rate mortgage costs.

Swap rates partly reflect what banks think will happen with Bank of England base rate. That base rate is factored in to the price of variable-rate mortgages.

So if the banks are right, and more base rate hikes are coming, then variable-rate mortgage costs could rise too.

What are swap rates and how do they affect mortgage prices?

Before mortgage lenders give out a homeloan, they first need to get that money from somewhere.

Originally, this cash came from the money building societies raised from their customers’ current account balances.

But now mortgages are mostly cash banks get by borrowing or trading with other financial firms, then repaying that with interest.

Swap rates are what mortgage lenders pay to these firms to get that cash.

It affects fixed-term mortgages, as banks normally ‘buy’ money over a term of two, three, five or 10 years.

That relates directly to the price of new fixed-rate mortgages, which are normally two, three, five or 10 years long.

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