Nationwide increases tracker rates
The UK’s biggest building society has become the latest lender to increase its tracker mortgage rates due to the increased cost of funding.
Nationwide Building Society said it was raising its tracker rates for home movers and people remortgaging by between 0.1% and 0.2% from Tuesday October 2.
The group’s two-year tracker with a £599 arrangement fee will now charge interest of 5.68%.
The move follows on from the UK’s biggest mortgage lender Halifax and the country’s second biggest lender Abbey, which both announced they were raising some of their tracker rates by up to 0.2% for new borrowers earlier this month.
A number of other mortgage lenders have since followed suit, including Alliance & Leicester, Standard Life and other members of the Halifax Bank of Scotland Group.
Banks are raising their rates in response to an increase in the interbank lending rate as a result of the crisis in the US sub-prime mortgage market, which lends money to people who would be turned down by mainstream banks.
High levels of defaults on these loans, which some claim should never have been advanced in the first place, have rocked global credit markets, as the loans are packaged up and sold on to investors in order to spread the risk.
This has led to interbank lending effectively drying up, sparking the crisis at Northern Rock.
A Nationwide spokeswoman said: “Overall money market rates have reduced recently, but short-term funding has increased slightly and so these rates have increased.”
But the group did have some good news for homeowners, as it is reducing the rates charged on its fixed rate loans by between 0.05% and 0.2%. The move follows a fall in Swap rates, upon which fixed rate mortgages are based.