Nationwide limits cheap mortgages

One of the UK's biggest mortgage lenders, the Nationwide, will stop all new mortgage borrowing on its standard variable rate (SVR).

From Monday its SVR, called a base mortgage rate, will be 4.69%, much less than that of other lenders.

But it will only be available to existing customers whose fixed or other special deals come to an end.

All lenders have been under pressure from the government to pass on the recent cut in interest rates.

A Nationwide spokesman denied the building society was flying in the face of the government's desires.

"Absolutely not - we have just passed it on to existing customers; we are just not going to pass it on to new customers," he said.

"We were one of the very few lenders still allowing direct access to a mortgage on our SVR," the spokesman added.

New customers will only be able to take out fixed rate and tracker mortgages.

Advantage

Since the massive wave of demutualisations of building societies in the mid- and late- 1990s, the Nationwide has stood out from other lenders by proclaiming the advantages of remaining a mutual, owned by its members.

"We have been getting a lot of business on our SVR which can move away at any time"
Nationwide spokesman

It has consistently argued that without shareholders it could afford to offer better savers rates and lower mortgage rates.

That has been most visible in its base mortgage rate, which has consistently been about half of one percentage point lower than that of most of its rivals.

Now though, Nationwide is concerned that it has become a temporary home for too many people moving their mortgages from other lenders, before potentially moving on to more attractive deals elsewhere in a few months time.

"It has become relatively more attractive, and we have been getting a lot of business on our SVR which can move away at any time," the spokesman said.

Ray Boulger of mortgage brokers John Charcol said the government's move to encourage major mortgage lenders to pass on the recent one and a half percentage point cut in interest rates was not working.

"Not only did the master plan not last for life, it didn't even last until Christmas," he added.

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