Nationwide hikes standard mortgage rate
Britain’s largest building society, Nationwide, decided earlier this month to increase its interest rates on standard variable rate mortgages, which has sparked fears that other lenders will follow suit.
The building Society had promised that customers that were on its standard rate mortgages would not pay above 2 percent over the base interest rate as set by the Bank of England, but according to reports has now scrapped that promise.
The decision to scrap the promise and hike rates came as a shock to many, and if other lenders do decide to do the same thing many homeowners could end up losing out financially.
New customers that now apply for a home loan with Nationwide will no longer be able to enjoy its 2.5 percent standard rate, which, as originally promised, is just 2 percent higher than the base rate, which stands at 0.5 percent. Instead, these borrowers will have to opt for a new higher mortgage rate that starts at 3.99 percent.
This means that someone with a £150,000 mortgage would have to pay an additional £118 a month. The fact that the mortgage now comes with no guarantee means that the full effect of base rate cuts may not be passed on in future, or if the base rate increases the lender could increase its rate by more than the base rate increase.
One industry official said: ‘This is a huge increase that people are going to have to be aware of. Nationwide wants to compete, but where are the competitively priced mortgages and saving accounts for their customers? ‘
He added: ‘The other question has to be what rival lenders who see this move will think? They will be watching to see how this goes down with customers.’
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