Nationwide is the latest high street lender to hike its mortgage interest rates.
Earlier this week, HSBC signalled interest hikes on more than 20 mortgage products making headlines with the market’s first sub-4 per cent interest rate since the "mini" Budget.
Lenders currently find themselves in a period of rising market funding costs. Two-year swap rates, a leading indicator for mortgage rates, have tipped back into 4 per cent territory, with five-year swaps also very close to 4 per cent.
Nationwide’s rate increases, effective today (March 3), have seen selected fixed and tracker mortgage products for both new and existing customers go up by 0.21 percentage points.
“The main factor for many lenders is that the wholesale cost for them has gone up on provided fixed rates,” Jamie Lennox, director of Dimora Mortgages, explained.
“With their costs to get the money in, they need to increase rates to maintain a profit margin.
“Some lenders may have found they were decreasing rates too aggressively and are now finding they are unwinding some of these changes to reflect the current market conditions.”
Last week, other mortgage lenders began pulling and increasing their headline interest rates following a flurry of applications from borrowers keen to lock in the lowest deals.
Co-operative’s lending arm Platform temporarily withdrew its five-year fixed rate of 3.75 per cent, saying it needed to prioritise existing applications.
Meanwhile, Virgin Money also increased its headline rate by 0.05 percentage points, to 3.99 per cent.
SONIA swaps
| Current | 01 Mar 2023 | 02 Feb 2023 | 02 Mar 2022 | |
|---|---|---|---|---|
| 1 Year | 4.495% | 4.526% | 4.121% | 1.328% |
| 2 Year | 4.411% | 4.453% | 3.746% | 1.570% |
| 3 Year | 4.239% | 4.267% | 3.503% | 1.571% |
| 5 Year | 3.972% | 3.989% | 3.252% | 1.458% |
| 7 Year | 3.805% | 3.819% | 3.121% | 1.347% |
| 10 Year | 3.715% | 3.727% | 3.062% | 1.271% |
| 15 Year | 3.688% | 3.697% | 3.063% | 1.225% |
| 30 Year | 3.549% | 3.565% | 2.970% | 1.124% |
Source: Chatham Financial (Updated 03 Mar 2023 | 10:00 GMT)
“What happens from here will likely hinge on the next base rate meeting later this month,” said Lennox.
The Bank of England governor Andrew Bailey suggested this week that the base rate may have reached a stable point, but left a further base rate rise on the table by saying “nothing is decided”.
The base rate currently sits at 4 per cent as of the last meeting of the monetary policy committee at the beginning of February - a 15 year high.
Director at Self Employed Mortgage Hub, Graham Cox, said Bailey's 'nothing is decided' comment yesterday “probably didn't help”.
“It's likely we'll see more major lenders increase their rates slightly over the coming days,” he said.
“But they could easily go back down again if any good news on the economy comes along.”
Managing director at Mortgage Republic Limited, Michael Webb, said the rate increases will also be due to lenders trying to manage their service levels following a series of headline rate announcements.
Often, headline rates - which often have a very short shelf life - prompt a flurry of applications from borrowers.
“Nationwide will be a busy lender in any market, and therefore will likely at times need to manage their business levels by reducing the incoming volumes to maintain service standards,” said Webb.
“Lenders do this by increasing their rates marginally to make them source lower on the sourcing systems.
“This is likely what has caused Nationwide to reprice upwards marginally.”
ruby.hinchliffe@ft.com
