Nationwide announces new rate increases from March 3

Nationwide are the latest lender to reverse their fixed rate pricing. Given their service timescales aren't suffering and other lenders have repriced similarly, this is almost certainly due to swap rates. Lenders' cost of borrowing money to then lend to customers for fixed-rate mortgages has increased in the last few weeks, by 0.3% - 0.4%. Given this is a problem being faced by all lenders offering fixed-rate mortgages, it seems inevitable others will follow suit, at least to some extent. For now, we hope these changes are things 'settling down', rather than a total U-turn on the recent rate cuts we have seen so far in 2023.

Nationwide will be a busy lender in any market, and therefore will likely at times need to manage their business levels by reducing the incoming volumes to maintain service standards. Lenders do this by increasing their rates marginally to make them source lower on the sourcing systems. This is likely what has caused Nationwide to reprice upwards marginally. However, swap rates are on the increase again, even with some base rate stability predicted across the wider media and markets, so we may start to see rates on offer begin to creep up again. Those who have been holding on to see what may happen before committing to a deal would be prudent to get an application in sooner rather than later; even if it is reviewed again should the market dictate savings could be made.

The main factor for many lenders is that the wholesale cost for them has gone up on provided fixed rates. With their costs to get the money in, they need to increase rates to maintain a profit margin.

Some lenders may have found they were decreasing rates too aggressively and are now finding they are unwinding some of these changes to reflect the current market conditions. What happens from here will likely hinge on the next base rate meeting later this month. However, with a handful of lenders already making price increases, it could lead to some form of panic from mortgage holders on what to do next.

A couple of lenders have started raising mortgage rates this week. The catalyst has been higher borrowing costs for lenders in the swaps market over the last month. Andrew Bailey's 'nothing is decided' comment yesterday, indicating it's possible the base rate will rise again on March 23rd probably didn't help either. It's likely we'll see more major lenders increase their rates slightly over the coming days. But they could easily go back down again if any good news on the economy comes along.

Swap rates have been on the increase over the past 7-10 days and this is what has been driving recent increases in the cost of mortgage borrowing. As long as we don't see increases at the rates we were seeing in the autumn, I feel that the market will remain reasonably resilient as customers have become more used to having to pay a higher rate of interest. Nationwide are a big player in the market so if they are increasing rates, there is a good chance other lenders may follow them. Alternatives for those who feel that interest rates could decrease at the end of the year remain looking at proceeding with a tracker rate mortgage. Alternatively, if clients have savings they may want to think about an offset mortgage to save interest costs.

The recent increase in swap rates is the driving force behind the current rate hikes. However, this development is not expected to significantly affect new business, given that the prevailing rates remain more favourable than those that followed the Kamikwasi budget. It is worth noting that anyone seeking a mortgage will need to accept the applicable rate, so that is another reason for minimal impact to new business. As the budget approaches on 15th March, the trajectory of swap rates and the possible impact of any additional increases to base rates remains to be seen. It is conceivable that this could herald a period of stability, with only marginal increases anticipated before further reductions come into effect.