Yahoo Finance ‘Kick in the teeth’ for families as Nationwide raises mortgage rates further than Bank of England
Britain's biggest building society has come under fire for hiking mortgage rates by three times as much as the Bank Rate rise announced last month.
Nationwide said it was upping rates on some of its loans by as much as 0.45 percentage points, which is triple the 0.15 percentage point increase made by the Bank of England in December. Then, the Bank Rate was raised to 0.25pc, up from a record low 0.1pc.
Experts warned the move would add further pressure to households already struggling with rising costs.
Paula Higgins, of the HomeOwners Alliance, a consumer group, said upping costs in excess of the true increase in interest rates was a poor way to treat customers, and was a “kick in the teeth” for families.
“It seems like it is now payback time for a lot of companies such as banks and lenders which lost money by helping people during the pandemic. We are now seeing costs rise across the board,” she said.
Families are facing the “year of the squeeze” with inflation exceeding 5pc, the highest in a decade, taxes rising from April, energy costs spiralling and the costs of goods and services reaching fresh highs.
Jonathan Harris, of mortgage broker Forensic Property Finance, said the news would be “a hard pill for cash-strapped borrowers to swallow, given the rising cost of living”.
He added: “It is more important than ever that borrowers shop around for the best mortgage when buying a property or remortgaging, using a broker to compare all the deals on the market.”
Nationwide said it was upping rates by between 0.05 and 0.45 percentage points on remortgage, product transfer and additional borrowing loans, which will add hundreds to the cost of borrowing for customers.
The biggest increases will hit existing borrowers most, such as those switching to new fixed deals or those borrowing more, while first-time buyers will face less severe increases of as little as 0.05 percentage points.
Henry Jordan, of Nationwide, said it was announcing the changes now, to kick in at the start of February, “to give borrowers certainty about what their payments will be”, as well as time to consider switching to a better deal.
He added: “We regularly review our mortgage range and these latest changes to our new business and switcher rates are reflective of the current environment. With swap rates [the underlying rates which determine how banks price deals] continuing to increase, fixed rates have begun to move upwards and our new rates follow changes made across the mortgage market.”
Barclays, Halifax, Lloyds Bank, NatWest, Nationwide and Santander all said they would pass on the full increase to customers with standard variable loans, which track central bank rates, when new levels were announced in December. Smaller lenders TSB, Virgin Money and Coventry Building Society also followed suit. Together, these lenders represent around 70pc of the British mortgage market.
About two million households have some form of variable mortgage and will soon have to pay more if they are not already. The 850,000 borrowers on tracker mortgages will see an average £186 increase in their yearly repayments, according to UK Finance, the lender body. This is equivalent to £15.50 extra a month.
For the 1.1 million customers on standard variable rate mortgages, costs will jump by an average of £9.58 a month, or £115 a year.
