Nationwide raises mortgage rates for new customers

Nationwide has announced that it is to increase mortgage rates for new customers.

The UK’s biggest building society is to raise the rates on some of its fixed-rate mortgages by 0.3 per cent from Wednesday and will also increase rates on some of its tracker mortgage products by 0.2 per cent.

Nationwide’s offer does not apply to NewBuy or four-year fixed rate mortgage deals.

The announcement follows Santander’s last week that it is raising the rates attached to its standard variable rate by 0.50 per cent.

Borrowers who already have a mortgage with the Nationwide and choose to stay with the building society will qualify for a 0.1 per cent discount on the rates offered to new customers.

This discount will apply to existing customers who borrow more, apply for a new product or moving home.

Nationwide says it has introduced the new rules to give existing customers security that they will be offered the best possible rates by their current provider.

Tracie Pearce, Nationwide's head of mortgages, said: "We wanted to give existing customers the clear message that their loyalty is valued. We are demonstrating this by offering them lower rates than those we offer our new customers.

The increase in mortgage rates comes despite the Bank of England’s introduction of a new £80 billion Funding for Lending scheme, designed to offer lenders incentives to offer cheaper mortgage products in return for being offered discounts on wholesale mortgage borrowing.

First-time buyers and borrowers who have small amounts of equity have found it increasingly difficult to raise the increased deposit most lenders require and have suffered at tighter borrowing criteria from lenders.

Clare Francis, a mortgage expert at comparison website MoneySupermarket, said: "The rates are going up and that's disappointing. The funding for lending initiative is aimed to get banks and building societies to lend. The hope was that it would result, perhaps, in increases in higher loan-to-value mortgage numbers and so far there is little evidence that is happening."

Nationwide lent £17.1 billion to mortgage borrowers last year and increased its market share to 12.1 per cent from nine per cent in 2010, making it the joint third largest mortgage lender.