Nationwide is preparing to raise its fixed-rate mortgage rates for the third time in three weeks on Friday, a move prompted by a surge in wholesale borrowing costs.
The building society plans to increase its fixed rates by as much as 0.7 percentage points, which would result in an annual increase of nearly £800 for a typical five-year mortgage holder with a 25% deposit.
This trend is not unique to Nationwide, as a slew of lenders, including NatWest, have announced similar hikes. NatWest plans to increase new business mortgage rates by up to 0.28 percentage points and remortgage deals by up to 0.45 percentage points starting Friday. The Family Building Society, a specialist lender, has declared that it will suspend all of its fixed-rate mortgages through broker services for a week beginning at 5 pm on Thursday.
The impetus behind these changes can be traced back to the soaring swap rates and gilt yields, which are connected to banks’ borrowing costs. These metrics have risen significantly due to higher-than-anticipated inflation data released in April and stronger than forecasted labour market data released in June.
Over the past three weeks, the average rate for a two-year fix has escalated from 5.34% to 5.92%, as per Moneyfacts, a data company. This rate increase will add an additional £70 per month for a buyer with a £200,000 loan.
The upcoming adjustments by Nationwide succeed previous rate hikes of up to 0.4 percentage points on May 26, followed by another rise of up to 0.2 percentage points on June 9. A Nationwide representative noted that the rising swap rates and the trend of lenders hiking rates have necessitated adjustments to their fixed-rate mortgage range. They asserted that despite the rate increases, their full mortgage range remains available to all borrowers.
In an unusual step, NatWest is aligning many of its two-year and five-year rates. Nicholas Mendes of mortgage broker John Charcol commented that this reflects the volatility of the market, as two-year fixes, which are typically cheaper than five-year fixes when interest rates are low, have been more expensive since last fall.
