Increase in mortgage interest rates despite base rate cut
October 31, 2008
The nation’s biggest building society, Nationwide, announced earlier this week that for the second time in the space of a week it was increasing the interest rate on some of its mortgage products. This comes despite the recent 0.5% cut in the base rate, which only a portion of lenders have promised to pass on to consumers. Amongst those that will be hardest hit by the Nationwide decision are borrowers with smaller deposits, such as first time buyers, who will see the highest rate hikes.
Officials from Nationwide said that it would be adding between 0.24% and 0.6% to its tracker mortgage rates. The largest rate hikes will apply to those with only a small deposit, who could face the 0.6% increase. With the building society already having hiked up rates once recently, this will come as a blow for consumers who were hoping that the recent base rate cut would help them to secure a more affordable mortgage deal.
An official from the Nationwide said that market conditions and changes amongst competitors were amongst the reasons for the interest rate hikes. He said: “It is regrettable that we have to increase our tracker rates, but we must take into account ongoing volatility in the wholesale markets and the high cost of funding. These changes will allow us to maintain control of the volume of business the society is attracting, and to continue lending in a responsible and prudent way.”
Recent research has shown that around three quarters of lenders have as yet failed to pass on the recent base rate cut to borrowers, with some only passing on a partial cut, and some - such as HSBC - refusing to pass on any of the base rate cut.
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I’m just glad mortgage rates are dropping here in Australia, after the constant rises under the previous conservative government, it’s nice to be paying a little less at last!