Nationwide raises mortgage rates for the THIRD time in a month as borrowing costs appear to remain high for years
- Rates on a range of fixed-rate home loan offers rose to 0.7 percentage points
- Nationwide had already raised rates twice in recent weeks
- The Bank of England is expected to raise key rates further to 4.75% next week
The UK’s largest building society has raised mortgage rates for the third time in less than a month after warning homeowners that borrowing costs will remain high for years to come.
Nationwide said it raised rates on a range of fixed-rate mortgage offers by up to 0.7 percentage points today — three weeks after rising to 0.45 points, which was followed by a rise to 0.2 points a week ago.
Lenders are scrambling to reprice mortgage deals as financial markets bet on further rate hikes from the Bank of England to tackle inflation.
Rate hikes: Nationwide has already raised interest rates on its fixed mortgages twice in the past month
Yesterday’s turmoil sent two-year government bond yields – the rate investors are asking to lend to the government – to a new 15-year high. Yields on 5- and 10-year Gilts are at an all-time high since last fall’s mini-Budget.
Mark Carney, the former governor of the Bank of England, tempered hopes that the current period of skyrocketing borrowing costs, which are driving households’ annual repayments by the thousands, would be temporary.
He said homeowners who secured their loans at low rates “just at the right time” should be aware that they will still face a major jump in payments at closing.
His warning came as a key adviser to Chancellor Jeremy Hunt said rate setters must continue to dole out the ‘medicine’ of rate hikes to avoid the ‘disease’ of worsening higher inflation.
Next week, the Bank of England is expected to raise another 0.25 percentage point, bringing the reference rate to 4.75 percent.
Market expectations about how far the bank will go have risen sharply, while there is growing evidence that it will be difficult to reduce inflation. It is no longer in double digits at 8.7 percent, but still several times above the Bank’s 2 percent target.
Expected gains also saw the pound rise to nearly $1.28 against the US dollar yesterday, its highest level since April 2022.
A Nationwide spokesperson said that with “lenders across the market raising rates, we need to make some increases in our fixed rate mortgage offerings.”
Sushil Wadhwani, a former member of the Bank of England’s Monetary Policy Committee who sits on Mr Hunt’s economic advisory board, said yesterday that more action was needed.
He told the BBC: ‘It is important to continue to administer medicine in the form of higher interest rates. If we delay raising interest rates, we could find that the disease is getting worse.”