Nationwide Boosts Mortgage Interest Rates

by Stewart Douglas

Story link: Nationwide Boosts Mortgage Interest Rates

The biggest building society in Britain, Nationwide, has today announced it is to raise interest rates across its tracker mortgages by up to 0.15% in spite of the freeze by the Bank of England, in a move that has been justified as absorbing increased operating costs in the current financial climate.

The move today sees rates for new mortgages lifted by as much as 0.15% above the Bank of England base rate to directly reflect the heightened cost it has to pay to borrow money from other banks, and to reflect the increased risk in lending derived from the sub-prime collapse and the shaky worldwide economy.

Nationwide is the latest in a line of several lenders to announce similar steps despite the fact that the Bank of England elected to keep rates on hold, suggesting that there may be underlying issues still within the UK banking industry as a result of the credit crunch and the sub-prime sector collapse in the US housing market.

“The costs of funding from both the wholesale and retail markets have increased, and we have found it necessary to follow other lenders who have recently increased their rates,” said Matthew Carter, mortgage director at Nationwide, justifying the move.

Having no shareholders, the Nationwide move has be seen as one driven by genuine motives and a realistic reflection of the increased costs for banks and mortgage lenders throughout the UK as a result of the credit crunch and higher inter-bank lending rates.

With 2008 set to continue to be a tricky year for credit markets, it looks as though more lenders may be forced to take similar steps in their mortgage rates.