Page last updated at 18:15 GMT, Thursday, 27 March 2008

Nationwide ups its mortgage rates

Nationwide sign
Nationwide is the UK's second biggest mortgage lender

One of the country's biggest mortgage lenders is increasing the cost of mortgages for new borrowers.

The Nationwide is increasing interest rates on new fixed-rate and tracker mortgages from Friday.

The rate on all new fixed-rate mortgages is rising by 0.2%, and on tracker mortgages by 0.51% or 0.57%.

The UK's second-biggest mortgage lender said the changes were the result of a rise in demand after competitors raised rates or withdrew products.

Nationwide will also be releasing its latest house price figures for March on Friday, with analysts expecting house prices to continue to slow.

'Quality not quantity'

Matthew Carter, Nationwide's director of mortgages, said: "Nationwide sympathises with anyone who is concerned about the availability of affordable mortgages."

He said that they were focussing on "prudent and responsible lending" rather than increasing their market share.

The lender said the cost of funding mortgages from the wholesale markets had increased, although much of its funding came from savings.

A spokeswoman said that they had seen a surge in demand for mortgages since other lenders had restricted who they were going to lend to, and they did not want to become "overly competitive".

She added that they were constantly monitoring the situation and would decrease interest rates if the situation changed.

Fewer mortgages

Financial information service Moneyfacts said earlier in the week that since last July the number of different mortgage deals on offer in the UK had fallen from 15,599 to 5,725.

Several smaller building societies have announced withdrawal of products in recent weeks or an intention to lend only to local customers.

Higher deposits are also being demanded from first-time buyers, with a Nationwide subsidiary - the Mortgage Works - one of those to withdraw from the 100% mortgage market.

On Thursday, the British Bankers' Association said mortgage approvals to home movers in February was down by a third compared with the same month last year.

The previous day, Mervyn King, the governor of the Bank of England, said mortgage rates had not followed the fall in base rates.

He said that bank mortgage rates were still roughly the same as they were last August, even though the Bank of England had cut interest rates from 5.75% to 5.25% in the same period.

He expected the UK housing market to remain subdued for some time.

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