Nationwide and Woolwich Pile on the Pain for Borrowers
Posted in Mortgage on November 18, 2008 by admin
Christian Ward asked:
Borrowers have been dealt another blow as mortgage giants Nationwide and Woolwich raise rates and the cost of two-year fixed rate mortgages hits a ten-year high.
Research by financial information specialist Moneyfacts.co.uk has shown the cost of an average two-year fixed rate - the most popular mortgage - has hit 6.75%.
Nationwide Building Society announced today that it has hiked its mortgage rates for the second time in a fortnight – with its two-year fixed rates rising by up to 0.5%.
Meanwhile, fellow mortgage giant Barclays-owned Woolwich has also raised rates and will pull its entire two-year fixed rate range as funds run out. Lenders have said that recent substantial rises in swap rates, the cost of borrowing fixed rate funding on the money markets, have left them with no choice but to increase mortgage costs.
Darren Cook, mortgage expert at Moneyfacts.co.uk, said: ‘The average two year fixed rate stands at 6.75%, the highest rate we have seen in the last 10 years.
‘Customers looking to fix their mortgage for five years are also paying the price as the average rate has increased to 6.72%.
‘The curse of Friday 13th bought more pain for borrowers as swap rates reached a new high of 6.49%.
‘With lenders having to pay such a huge price to secure funds and a lag time of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better.’
Nationwide’s move pushes the cost of a two-year fixed rate for a homebuyer with a 10% deposit and paying a £599 fee up from 6.45% to 6.95% and the rate on the similar fee-free loan has gone up from 6.85% to 7.35%.
Nationwide, Britain’s biggest building society, blamed the rate increases on a sharp rise in the cost of borrowing money on the financial markets and the raising of mortgage rates by a number of its competitors.
Rates on remortgages have also been raised and remain higher than those for homebuyers. A borrower coming to the end of a Nationwide two-year fixed rate with a 10% deposit has seen the fee-free two-year fixed rate rise from 7.05% to 7.55% and the £599 fee product rise from 6.65% to 7.15%.
All of these rates are substantially higher than the building society’s standard variable rate of 6.49% and even a remortgager with at least a 25% now faces a two-year fixed rate above this at 6.75% - despite the deal’s £599 fee.
Matthew Carter, divisional director for mortgages at Nationwide, said: ‘We have seen continued large rises in money market rates together with further competitor activity and as a result it has been necessary to increase the rates on our range of mortgages.
‘While markets remain volatile we can expect to see frequent changes to fixed rate mortgages across the industry.’
The rise in funding costs and ongoing mortgage crunch has also see Woolwich, owned by Barclays, pull out of the two-year fixed rate mortgage market altogether – citing the need to control demand as its rates have become increasingly competitive.
Halifax, Abbey and Bradford & Bingley have all also raised mortgage rates recently. Halifax, Britain’s biggest mortgage lender now only offers its best tracker deal to those with a 40% deposit. Woolwich said it was scrapping existing rates at midnight tonight and replacing some of them with higher rates or bigger fees.
Its best lifetime tracker rate rises from 5.74% to 5.99%. The new range of fixed-rate deals will be unveiled next week. A spokeswoman said: ‘The reason for these changes is the increase in swap rates over the last couple of weeks.’
Ray Boulger, of mortgage brokers John Charcol, said: ‘The only surprise is that it’s taken so long for lenders to react.’
Borrowers have been dealt another blow as mortgage giants Nationwide and Woolwich raise rates and the cost of two-year fixed rate mortgages hits a ten-year high.
Research by financial information specialist Moneyfacts.co.uk has shown the cost of an average two-year fixed rate - the most popular mortgage - has hit 6.75%.
Nationwide Building Society announced today that it has hiked its mortgage rates for the second time in a fortnight – with its two-year fixed rates rising by up to 0.5%.
Meanwhile, fellow mortgage giant Barclays-owned Woolwich has also raised rates and will pull its entire two-year fixed rate range as funds run out. Lenders have said that recent substantial rises in swap rates, the cost of borrowing fixed rate funding on the money markets, have left them with no choice but to increase mortgage costs.
Darren Cook, mortgage expert at Moneyfacts.co.uk, said: ‘The average two year fixed rate stands at 6.75%, the highest rate we have seen in the last 10 years.
‘Customers looking to fix their mortgage for five years are also paying the price as the average rate has increased to 6.72%.
‘The curse of Friday 13th bought more pain for borrowers as swap rates reached a new high of 6.49%.
‘With lenders having to pay such a huge price to secure funds and a lag time of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better.’
Nationwide’s move pushes the cost of a two-year fixed rate for a homebuyer with a 10% deposit and paying a £599 fee up from 6.45% to 6.95% and the rate on the similar fee-free loan has gone up from 6.85% to 7.35%.
Nationwide, Britain’s biggest building society, blamed the rate increases on a sharp rise in the cost of borrowing money on the financial markets and the raising of mortgage rates by a number of its competitors.
Rates on remortgages have also been raised and remain higher than those for homebuyers. A borrower coming to the end of a Nationwide two-year fixed rate with a 10% deposit has seen the fee-free two-year fixed rate rise from 7.05% to 7.55% and the £599 fee product rise from 6.65% to 7.15%.
All of these rates are substantially higher than the building society’s standard variable rate of 6.49% and even a remortgager with at least a 25% now faces a two-year fixed rate above this at 6.75% - despite the deal’s £599 fee.
Matthew Carter, divisional director for mortgages at Nationwide, said: ‘We have seen continued large rises in money market rates together with further competitor activity and as a result it has been necessary to increase the rates on our range of mortgages.
‘While markets remain volatile we can expect to see frequent changes to fixed rate mortgages across the industry.’
The rise in funding costs and ongoing mortgage crunch has also see Woolwich, owned by Barclays, pull out of the two-year fixed rate mortgage market altogether – citing the need to control demand as its rates have become increasingly competitive.
Halifax, Abbey and Bradford & Bingley have all also raised mortgage rates recently. Halifax, Britain’s biggest mortgage lender now only offers its best tracker deal to those with a 40% deposit. Woolwich said it was scrapping existing rates at midnight tonight and replacing some of them with higher rates or bigger fees.
Its best lifetime tracker rate rises from 5.74% to 5.99%. The new range of fixed-rate deals will be unveiled next week. A spokeswoman said: ‘The reason for these changes is the increase in swap rates over the last couple of weeks.’
Ray Boulger, of mortgage brokers John Charcol, said: ‘The only surprise is that it’s taken so long for lenders to react.’
