- It comes as the Bank of England continus its painful battle against inflation
Britain’s biggest building society yesterday raised mortgage rates in a sign that the price war between lenders may have been stopped in its tracks by the Bank of England.
Nationwide said it would put up rates on some of its home loan products just a week after announcing cuts – and in the wake of a similar recent move up on rates by rival Santander.
It came as the Bank signalled that the painful battle against inflation is not yet over – even though it is confident of hitting its 2 per cent target by April.
Governor Andrew Bailey yesterday opened the door to a cut in the Bank’s benchmark interest rate – but not yet.
It remained at 5.25 per cent after a series of increases designed to bring down inflation.
Nationwide said it would put up rates on some of its home loan products just a week after announcing cuts – and in the wake of a similar recent move by rival Santander
The Bank’s nine rate-setters were split over their latest interest rate decision, with six voting to keep them on hold, two voting for a rise and one for a cut.
It was the first time that any have voted for a cut since March 2020, at the height of the pandemic.
> Bank holds rates at 5.25% – what it means for YOUR mortgage and savings
The hold is likely to feed through to the deals being offered by mortgage lenders – where rates have been coming down in recent months.
David Hollingworth, of mortgage broker London & Country, said: ‘Some lenders will still make improvements but the lowest seem to be bottoming out. Those holding out for ongoing rate cuts may find that the sheer pace of the rate war may slow.’
Falling inflation and the possibility of rate cuts could deliver a boost to the Tories before the coming general election.
Chancellor Jeremy Hunt said it was ‘obviously very positive news for families with mortgages that interest rates appear to have peaked’.
But Nationwide’s move highlighted the disconnect between the Bank’s actions and rates on offer to borrowers, which could mean homeowners remaining under strain over coming months.
The Bank of England started putting up interest rates in December 2021 as it battled to bring down inflation, which soared into double figures as energy costs and food bills spiked, pushing up wage demands and threatening a price spiral.
Interest rates climbed to 5.25 per cent by last summer but has been on hold since then.
Bank of England Governor Andrew Bailey yesterday opened the door to a cut in the Bank’s benchmark interest rate – but not yet
Homeowners have in many cases seen monthly repayments go up by hundreds of pounds as they have been forced on to new, pricier deals.
Nationwide announced that rates on some products would go up from today ‘to ensure that our mortgage rates remain sustainable’.
Yesterday, Mr Bailey unveiled new forecasts for the economy which suggested that it is making faster than expected progress in bringing down inflation – thanks to plunging energy bills.
The Bank now thinks inflation will drop to 2 per cent by the second quarter of this year, 18 months earlier than it previously expected. But it cautioned that the fall would prove temporary.