Nationwide raises tracker rates for new borrowers
The lender is raising all two-year tracker rates by 0.15% for new borrowers from Friday.
However, Nationwide will pass on the full Bank of England 50 basis points cut (from 0.75% to 0.25%) to existing tracker rate customers and to its reversion rates on April 1.
It means the lender’s Base Mortgage Rate and Standard Mortgage Rate will stand at 2.25 % and 3.74% respectively.
A Nationwide spokeswoman, said: “Following the 0.5% reduction in bank rate, the difference between our on-sale fixed and tracker rates widened, so we have increased tracker rates slightly to reduce this differential.
“Our products remain competitive and the change does not impact existing tracker mortgage customers / pipeline applications who will still see the full benefit of the bank rate change.”
More lenders are expected to change tracker rates after the emergency Bank of England rate cut yesterday in response to the coronavirus.
Colin Payne, associate director at broker Chapelgate, said: “I think Nationwide is just the first of most, if not all, lenders that will increase margins on tracker rates and take advantage of an opportunity to increase their profit margin.
“No lender wants to put their head above the parapet in terms of pricing and be inundated with applications and having a sub 1% rate would send out all those signals.
“So I believe over the coming days all lenders will re-price to the point that their trackers either fall in line with Nationwide or are slightly more expensive.”
There hasn’t been a mass rush to re-price trackers yet, but the base rate drop is likely to prompt some readjustment from lenders in terms of margins on offer, according to David Hollingworth, director, London & Country.
However, he said trackers are now looking much more attractive compared to corresponding fixed rates.
He said: “The price differential wasn’t big enough for people to choose the risk of a tracker over a fixed… but the lowest trackers will now be much lower [than fixed-rate equivalents] – at least for a period.”