Nationwide raises mortgage rates for THIRD time in a month as borrowing costs look set to remain high for years
- Rates on a range of fixed rate home loan deals put up to 0.7 percentage points
- Nationwide had increased rates twice already in the past weeks
- The Bank of England is expected to hike the base rate further next week to 4.75%
The UK’s biggest building society has raised mortgage rates for the third time in less than a month as homeowners were warned borrowing costs look set to remain high for years.
Nationwide said it was today putting up rates on a range of fixed rate home loan deals by up to 0.7 percentage points – three weeks after an increase of up to 0.45 points, which was followed by a rise of up to 0.2 points a week ago.
Lenders are scrambling to reprice mortgage deals as financial markets bet on further Bank of England rate increases to tackle inflation.
Rate hikes: Nationwide already hiked rates on its fixed mortgage deals twice in the past month
Yesterday’s turbulence sent yields on two-year gilts – the rate investors charge to lend to the government – to a fresh 15-year high. Five and ten year gilt yields are at highs not seen since last autumn’s mini-Budget.
Mark Carney, the former Bank of England governor, dampened hopes that the current period of soaring borrowing costs, which is adding thousands to families’ annual repayments, would be temporary.
He said that homeowners who fixed their loans at low rates ‘just at the right time’ should be aware they will still face a big jump in payments when they conclude.
His warning came as a key adviser to Chancellor Jeremy Hunt said rate-setters should keep doling out the ‘medicine’ of interest rate hikes to save the ‘disease’ of higher inflation worsening.
Next week, the Bank of England is expected to go for another 0.25 percentage point hike, taking its benchmark rate to 4.75 per cent.
Market expectations of just how far the Bank will go have risen sharply amid growing evidence of how hard it will be to bring down inflation. It is no longer in double digits at 8.7 per cent but still several times above the Bank’s 2 per cent target.
Anticipated hikes also saw the pound climb to nearly $1.28 against the US dollar yesterday, its highest level since April 2022.
A Nationwide spokesman said that with ‘lenders across the market increasing rates, we are having to make some increases across our fixed rate mortgage range’.
Sushil Wadhwani, a former member of the Bank of England’s rate-setting Monetary Policy Committee who sits on Mr Hunt’s economic advisory council, yesterday said more action was needed.
He told the BBC: ‘It’s important to continue administering the medicine in the form of higher interest rates – if we delay raising rates then we might find that the disease gets worse.’