Nationwide drops Base rate mortgage promise
Nationwide is to drop is pledge to hold mortgage rates to the Bank of England base rate.
The UK's largest building society's base mortgage rate (BMR) - its version of a standard variable rate - is pegged to no more than two per cent over the Bank rate.
However, for new customers this promise will be dropped - as it is expected the Bank will hold its rates at 0.5 per cent for a number of months.
Customers taking out a fixed-rate deal from April 30th will see their mortgages fall onto a new standard mortgage rate (SMR) when the mortgage expires - meaning no one will face the rate for at least two years.
While the BMR is at 2.5 per cent, the SMR is currently at 3.99 per cent and has no promise attached to it to move with the base rate.
Nationwide states the SMR pricing will move with the Bank of England rate and a number of other factors including inter-bank lending rate Libor, swap rates and what competitors are charging.
The move comes as the 2.5 per cent BMR beats a large number of Nationwide's remortgage products - and is also way below competitors SVRs which stand at an average of 4.69 per cent.
Around 500,000 Nationwide customers are on the BMR - and will be allowed to stay on it, as will those currently on a fixed-rate deal.
A Nationwide spokesperson explained the building society was not dropping the BMR because it could not longer afford to offer better savings rates with it so low.
She added the SMR would provide more flexibility over the rates offered to savers.
New customers at Derbyshire and Cheshire building societies - now merged with Nationwide - will continue to be able to get mortgage deals dropping to the BMR, but the mortgage pricing will soon fall into line with Nationwide.
Dunfermline building society customers will remain on that lender's pricing structure and will be unaffected.
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