Mail Online / Thisismoney mortgage opportunity

ended 06. January 2022

A journalist at Thisismoney / Mail Online is looking for some quick comments (deadline 2pm today) on the fixed and tracker mortgage rate rises Nationwide has announced. Briefly: 

On Thursday 6 January, Nationwide will be making rate changes on selected two, three and five-year fixed rate and two-year tracker products at all Loan-to-Values (LTVs) across its mortgage range. 

The changes will see rates on selected two and five-year fixed rate products up to 95% LTV and on selected two-year tracker rates up to 85% LTV increase by between 0.05% and 0.20%. The Society’s three-year fixed rates will no longer match the equivalent two-year products and as a result will increase by between 0.05% and 0.45%. 

Remortgages will see some of the largest increases:

  • Two-year fixed rate at 60% LTV increased by 0.10% to 1.44%, with a £999 fee. 
  • Five-year fixed rate at 80% LTV increased by 0.10% to 1.94%, with a £999 fee. 
  • Three-year fixed rate at 75% LTV increased by 0.20% to 1.64%, with a £999 fee. 

As well as three year fixes, some of which will be subject to largest increase of 0.45%. 

The journalist's questions are: 

  • What will these rate changes mean for households?
  • Are they fair in respect of the base rate rise (and the fact savings rates are not increasing)?
  • Might Nationwide be increasing rates by more than the 0.15% base rate rise in anticipation of further rises.?

Most other lenders haven't published their rate rises so it is difficult to compare, but if you have any insights into what rises are happening elsewhere that would also be appreciated. 

10 responses from the Newspage community

Star Quote
"It looks as if rate rises are very much going to be part of the fabric of the mortgage market this year, especially if inflation continues to stubbornly refuse to fall. Lenders often act in anticipation of future rises and whilst this may be the case here, there are also other factors that come into play, such as controlling service levels especially if many staff are absent during this latest Covid wave. The message to consumers, however is very clear, the ultra-low mortgage rates we saw last year are consigned to history, and we may not see their like again for a generation. "
Natiowide's increases in fixed rate deals are not so much a reflection of the recent Bank of England base rate rise but what many think that will happen with rates in 2022. The BoE raise in December was modest but a real signal that rates are only likely to go one way and that's up. The BoE Monetary Policy Committee (MPC) are meeting once again on the 3rd of February a a further rise is very much on the cards. Clearly, rising mortgage rates to many will result in a further squeeze on the cost of living, adding further pressure to inflation and energy costs
With the largest rate hikes in the remortgage sector it is going to hit existing householders hardest. Combined with rising inflation and energy costs those with larger mortgages and homes will see a significant increase in monthly bills. Anyone within the last 6 months of their mortgage deal should review now to see if they can lock in an interest rate today before any further rate increases. This move by Nationwide isn't surprising or isolated. Accord will increase rates on 06/01/2022 across their buy to let mortgages and Clydesdale will increase their standard variable rate from 4.34% to 4.49% on 13/01/2022. The large hike in fixed and tracker mortgage rates by Nationwide almost certainly reflects their view that the BoE will ramp up interest rates again soon. Mortgage lenders forward price interest rates which means they factor in what they think is going to happen in the future.
Many of the lenders raised the cost of their fixed rate mortgages in anticipation of a base rate hike last year but the price rises stopped for the Christmas period. This is the first rise from the big lenders this year and it won't be the last. Nationwide raised some of its fixed-rate rates by 0.2% at the end of November stating the cost of funding fixes had increased pushing up the cost of borrowing.
There are a huge variety of reasons that lenders amend rates, both up and down, that are completely separate from the Bank of England rate. These include; competitor pricing, their own cost of borrowing money that they lend out and their capacity to process the business they attract. The latter one is certainly an issue in the intermediary space with lenders very cautious to ensure they maintain their service standards for brokers. This means increasing rates to make themselves less attractive if they are struggling - so if for example they are short staffed at the moment, they may take the commercial decision to increase rates to slow down the volume of work. Nationwide is a larger player and it is likely their move will prompt others to review their rates too, as if the business is now not going to them, it is going to other lenders - which in turn may cause them concern over their own service levels.
Nationwide may well have opted to go first but I very much doubt they will be the last to hike their rates in the coming days. As advisers we have been expecting this after the Bank of England openly stating they will have to increase rates against the background of high inflation. This might not be an issue for those that moved house or remortgaged during the last 12 months or so but surely there is a problem brewing on the horizon in 2 years when people exit rates below 1% and are looking at perhaps double or even triple that on a new deal?
Nationwide's large rate hikes can only mean one thing. They expect inflation to stay high for at least the next year and the Bank of England to raise interest rates a few more times in 2022. The next increase is expected on February 3rd, and I wouldn't be surprised to see the base rate between 1.5-2% by year end. Many homeowners are on fixed rates, so will be protected from the effects, but for the remaining millions on the Standard Variable Rate, this could be very bad news indeed. The days of rock bottom mortgage rates could be coming to an end, sooner than we think.
Anyone on a tracker deal or SVR will see their monthly payments rise. This, coupled with more utility businesses about to go bust and thousands of consumers about to be pushed onto the energy cap along with the fastest growth in food prices we've seen in over a decade, all add up to one thing; being poorer than we were. The rise in new rates is fair as lenders have to turn a profit and maintain adequate savings if there's an economic crash. But, of course, it won't feel fair to new mortgage customers, but that's how the cookie crumbles. Perhaps this is a lesson the public can learn; when I and other mortgage brokers, of which I know hundreds, were screaming at you six months ago to remortgage and lock in low deals, please listen to us. We're not doing it for the sake of it. So here's the warning again; the best time to remortgage was six months ago; the second-best time is now!
After the historic lows seen in 2021 many mortgage advisers have been predicting rate rises. Nationwide are one of a few Lenders who have confirmed rate rises driven in part by the Bank Of England Base rate increase in December and an anticipated further increase in February, as they try and combat inflationary pressures. Interestingly there have been signals that rate rises in the higher loan to values will be less severe than in the lower loan to values, which shows lenders appetite to continue supporting those with lower deposits. This coupled with the news this week that First Time Buyer numbers are at their highest means the banks are still eager to help by limiting rate rises for those with smaller deposits. All of this points to lenders settling in for what is deemed to still be a low base rate economy for the foreseeable future. Let's not forget that many lenders pulled out of higher loan to value lending at the start of the pandemic as they sought to rationalise what impact lockdowns would have on the publics ability to meet their mortgage commitments. This allowed them to reduce rates significantly in a bid to tempt borrowers towards the latter part of the year. This means that many lenders potentially have scope in their book of debt for higher risk (higher loan to value) lending. Higher rates will potentially mean higher monthly payments for clients remortgaging in the next 3-6 months however many of those who are remortgaging in that timescale will have missed out on those low rates in any event, and are likely to see rates similar to those they are already on.
It's disappointing if these are the result of Bank Of England rate rises. As I don't recall Nationwide reducing rates when the Base rate fell. However, I don't think these are necessarily related to the Base rate rising, and may just be due to their current appetite in the marketplace.