Nationwide has announced changes for customers from Wednesday, cutting a wide range of fixed mortgage rates by up to 0.15% while increasing a small range of tracker rates by up to 0.10%.
The changes take effect from Wednesday, November 4, and include rates across its First Time Buyer, Home Mover, Existing Customer Moving Home and Remortgage products.
Virgin Money rate reductions
Nationwide-owned Virgin Money will also reduce purchase two-year fixed rates by up to 0.12% from Wednesday, while five-year fixed rates will be reduced by up to 0.13%.
Shared ownership fixed rates will be reduced by up to 0.10%, while remortgage two-year fixed rates will be reduced by up to 0.10% and five-year fixed rates by up to 0.17%. Barclays and Halifax also announced cuts earlier this week.
Competition between lenders
Experts told Newspage that the cuts point to growing competition between major lenders for fixed-rate borrowers, but Nationwide’s decision to increase some tracker rates highlights how different types of mortgage can move in opposite directions.
Doug Miller, mortgage broker and director of Bath-based Lansdown Financial Services, said growing competition was offering borrowers relief. He added: “Nationwide cutting fixed mortgage rates just days before a potential Bank of England rate rise is welcome news for borrowers. Several major lenders have reduced rates this week, and competition is clearly heating up. Interestingly, tracker rates are moving in the opposite direction.”
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, said the contrasting changes could reflect Nationwide’s efforts to manage demand and profit margins. He added: “Nationwide joins other high street lenders by making post-Budget rate reductions on selected fixed rates, but has chosen to increase some trackers. This could be down to managing business volumes and margins, but it is noticeable, especially ahead of an anticipated increase in the Bank of England base rate.”
Tracker increases and double hits
Rohit Kohli, senior mortgage adviser for residential and commercial at Romsey-based The Mortgage Stop, said the tracker increases could leave new borrowers facing two successive rises. He added: “Barclays, Halifax and now Nationwide. It’s another modest reduction and a welcome one with experts saying a Bank Rate rise is all but nailed on for Thursday. It’s the tracker increase that caught my eye.”
Toby Quanstrom, director of Eastbourne-based Quanstrom Financial, said falling fixed rates and rising tracker prices could make payment certainty more attractive to borrowers. He added: “Anyone taking out a Nationwide tracker this week could be hit twice: once by tomorrow’s price rise and again if base rate goes up on Thursday as markets expect. That is why the fixed rate cuts matter more.”
Stephen Perkins, mortgage broker and managing director of Norwich-based Yellow Brick Mortgages, said the different pricing decisions reflected how fixed and tracker mortgages worked. He added: “Nationwide cutting fixed rates while increasing trackers looks contradictory, but the two products are priced very differently. Fixed rates are heavily influenced by swap rates, funding costs and competition, while a tracker is essentially Bank Rate plus the lender’s chosen margin.”
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth, said Nationwide appeared to be making its trackers less competitive. He added: “Nationwide cutting fixed rates while increasing trackers might look like the mortgage market has forgotten which way is up, but the two are driven by different forces. Fixed deals reflect swap rates and expectations for where interest rates are heading over the next few years, while trackers are much more closely linked to Bank Rate and the margin lenders want to make.”
Justin Moy, managing director at Chelmsford-based EHF Mortgages, said the combined changes could shift demand towards fixed deals. He added: “As expected, once Halifax and Barclays had shown their hands, Nationwide and Virgin Money have also announced several cheaper fixed rate deals. The move by Nationwide to increase the tracker margins is simply to make the fixed rates more attractive. A cut of say 0.15% on fixed rates and an increase of 0.10% on trackers creates a 0.25% swing in pricing and may encourage more uptake of fixed rates at a time that trackers may be too popular.”
