Nationwide Increase Rates as Economy continues to worsen

Nationwide putting rates up is another sign that the mortgage market has hit a bump in the road after what had been a more encouraging period for borrowers.
This is less about lenders suddenly losing their appetite to lend and more about the cost of money moving against them. Swap rates and gilt yields have risen as markets fret once again about inflation, energy prices and geopolitical uncertainty, and lenders can only absorb so much before repricing.
The concern is that once the bigger lenders move, others tend to follow. Borrowers should not panic, but anyone coming towards the end of a fixed rate would be wise to start looking early. In this market, hanging around hoping for tomorrow’s cheaper rate can sometimes mean watching today’s disappear.

Nationwide’s increase is better viewed as evidence of how quickly mortgage pricing can change when wholesale rates and inflation expectations move, rather than proof on its own that the economy is worsening.

For homebuyers and movers, repeated changes make budgeting and deciding when to secure a rate more difficult. For property investors, there can be a less obvious consequence: higher term-mortgage pricing may reduce the amount available when refinancing, potentially leaving a shortfall where that refinance is intended to repay a bridging loan.

“One lender’s repricing does not establish the direction of the whole market, but it is another reminder that borrowers should not assume the mortgage terms supporting their planned exit will remain unchanged

Nationwide, one of the biggest lenders in the country, is joining the rush to raise rates after several other lenders repriced this week. When a lender that size moves, it tells you where pricing is heading.

Confidence was already fragile. This will not help.

The Chancellor spent this week talking about growth being central to everything the governments plans. Housing has a huge part to play in that growth. On every measure that matters right now, they are failing.

Borrowers should not wait for something better. Secure a rate now and review it if the market improves.

Canary in the coal mine? We hope not. Nationwide have held out as long as they can and the increase in tracker rates is rather telling on their outlook for the MPC meeting at the Bank of England on the 17th September. With so much market volatility in the economy we can expect rates to remain high until things calm down. We hope this is just a flash in the pan before we see rates calm down again.

Nationwide's decision to increase their rates come as no surprise and follow the market trend, lenders have started increasing rates after the Middle East conflict taking another turn and hostilities starting again. What is interesting is the decision to increase tracker rates as well as fixed rates, these have been proving popular with clients given the difference between them and the equivalent fixed rates. Whether this is being driven by the volume of new business being taken on a tracker or Nationwide are forecasting a Base Rate increase next week, we shall see when the committee meet on the 17th.

Nationwide nudging rates up by around 0.2% isn't the economy collapsing, it's lenders pricing in what the money markets already expect. Swap rates have been climbing on stubborn inflation, and a big part of that is oil prices pushed up by the ongoing conflict in the Middle East, which feeds straight into borrowing costs. Base rate sits at 3.75% with the next decision on 17 September, so lenders are protecting margins ahead of that, not reacting to some sudden domestic economic collapse. And this is unlikely to be the last increase, if oil stays elevated and inflation stays sticky, expect more lenders to follow. For borrowers, the message is simple, rates are more likely to drift up than down from here, so anyone with a deal expiring in the next six months should be locking something in now. Sitting on your hands in this market is the expensive option

Higher rates and a worsening economy get lumped together, but they often tell opposite stories. Nationwide's 0.2% is a response to inflation proving stubborn and gilt yields climbing to levels we haven't seen in years, which is the market bracing for prices to stay higher for longer rather than a sign the economy is falling off a cliff. If anything, rates stay high precisely because the economy hasn't slowed as much as hoped. For borrowers the practical reality is unchanged: the monthly cost of a mortgage is still what decides whether people move, and small increases like this keep chipping away at confidence. I'd be wary of calling a firm new trend, though. Swap and gilt moves reverse quickly, and the MPC meets on the 17th, which will tell us far more than any single lender's repricing. The bigger picture is the same as it's been all year. Borrowing is expensive enough to keep the market subdued, and that won't change until the cost of money genuinely eases.