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Nationwide hikes mortgage rates just weeks after cutting them

End of the road: Mortgage prices could rise as banks start raising prices

Were mortgage rates below 4% a flash in the pan? The cost of home loans is rising nationwide just weeks after cutting them

  • UK’s largest building society raises many of its mortgage prices
  • Nationwide said rising swap rates were to blame for rising home loans

The Nationwide Building Society is raising mortgage rates by up to 0.20 percentage points, just over two weeks after making a series of cuts to its home loan costs.

The news follows warnings from property experts that mortgage offers below 4% could soon disappear.

Nationwide, the nation’s largest construction company, said it had to raise mortgage costs due to rising swap rates.

One of the biggest mortgage price increases is a 0.20 percentage point increase on a five-year fixed rate remortgage deal with a 40% deposit.

It was priced at 3.99% on February 15, but now costs 4.19%, with a fee of £999.

End of the road: Mortgage prices could rise as banks start raising prices

End of the road: Mortgage prices could rise as banks start raising prices

The free version of the same product went from 4.18% to 4.39%.

His five-year fixed rate for the first buyer with a 40% deposit and £999 fee rose 0.10 percentage points to 4.24%, and his mover mortgage with the same terms increased of the same amount.

Last month, Nationwide unveiled a series of mortgage rate cuts of up to 0.7 percentage points.

Today’s increases were primarily for loans with larger deposits, and most of the discounts on low-deposit products remain.

National Home Manager Henry Jordan said: “Over the past few months we have continued to lower rates across our range of mortgages, including four times this year.

“However, given the recent increase in swap rates, we need to make small increases on some mortgage rates this week so that we can continue to balance our support for all types of borrowers with the need to ensure that our rates remain sustainable.”

What’s next for mortgage rates?

Mortgage rates hit highs not seen in a few years following the September mini-budget, with the two-year average rate rising above 6.5% in October.

Although rates have since fallen, it is likely that the price of new fixed rate mortgages will rise again in the near term.

This is because swap rates are rising, and these help to price fixed rate mortgage costs.

Swap rates partly reflect what banks think will happen with the Bank of England base rate. This base rate is factored into the price of variable rate mortgages.

So if the banks are right and more base rate hikes are coming, the costs of variable rate mortgages could go up as well.

What are swap rates and how do they affect mortgage prices?

Before mortgage lenders will grant a home loan, they first have to get that money somewhere.

Originally, this cash came from building societies’ money taken from the current account balances of their customers.

But now, mortgages are mostly cash that banks get by borrowing or negotiating with other financial companies and then paying it back with interest.

Swap rates are what mortgage lenders pay these companies to get that money.

It affects fixed-term mortgages, as banks normally ‘buy’ money for two, three, five or ten years.

This is directly related to the price of new fixed rate mortgages, which normally last two, three, five or ten years.

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