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Nationwide Raises Mortgage Rates For Second Time In Fortnight

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http://www.telegraph.co.uk/finance/persona...-fortnight.html

Nationwide is raising rates on more than a third of its fixed-rate loans, increasing them by an average of 0.23 of a percentage point.

The move comes just a fortnight after the group repriced its entire fixed-rate range, raising rates by up to 0.86 of a percentage point in response to higher wholesale funding costs.

The increases sparked a round of rate rises among other lenders, with major groups such as Halifax, Cheltenham & Gloucester, Abbey and Alliance & Leicester all increasing the cost of the deals they offered.

The changes were enough to push up the average cost of a two-year fixed-rate mortgage from 4.74pc at the beginning of last week to 4.92pc today.

Darren Cook, of financial information group moneyfacts.co.uk, warned that the average rate looked set to continue rising to more than 5pc or even 6pc during the coming weeks. He said: "During the next week I wouldn't be surprised if the average rate increased to 5pc and continued rising."

The increases have been driven by steep rises in "swap" rates, on which fixed-rate mortgage deals are based. Two-year swap rates have soared from 1.98pc in the middle of May to 2.34pc today, peaking at around 2.5pc on June 11.

Mr Cook said there was generally a 10-day lag between a steep increase in swap rates and lenders increasing their mortgage rates, as groups are currently buying only small tranches of funds through the wholesale markets.

Average margins on two-year fixed-rate mortgages are now three times higher than they were before the credit crunch struck at 2.58pc, compared with a historical average of around 0.8pc.

Nationwide is increasing the cost of its two-year fixed-rate mortgage for homebuyers with a 40pc deposit who pay a £995 fee by 0.2 of a percentage point to 4.18pc, while the same loan for someone borrowing up to 75pc of their home's value is rising by 0.3 of a percentage point to 4.58pc.

However, many of its deals for people borrowing more than 75pc of their home's value remained unchanged. The new rates come into effect from tomorrow.

Andy McQueen, mortgage director at Nationwide, said: "Recent moves by competitors have required us to review the pricing of selected fixed rate mortgages. We are making these changes to ensure we continue to maintain an appropriate mix of business on these products."

It also emerged today that nationalised bank Northern Rock increased the cost of the majority of its fixed rate deals over the weekend by up to 0.7 of a percentage point.

The group raised rates on its two-year fixed-rate loan for people borrowing 65pc of their home's value who pay a £995 fee by 0.44 of a percentage point to 4.09pc, while the rate on its five-year fix with the same fee for people borrowing up to 75pc of their home's value rose by 0.7 of a percentage point to 5.79pc.

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It's only the beginning.

There are so many high level bank execs suffering because you aren't doing enough to support their lavish lifestyles.

But seriously, what the lenders lose out in volume, they can definitely make up with margin.

Edited by cashinmattress

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http://www.google.com/hostednews/ukpress/a...9m9xbKz4BfMZfQg

Darren Cook, of financial information group Moneyfacts.co.uk, warned the average rate looked set to continue rising to more than 5% or even 6% during the coming weeks. He said: "During the next week I wouldn't be surprised if the average rate increases to 5% and continues rising."

The increases have been driven by steep rises in swap rates, upon which fixed-rate mortgage deals are based. Two-year swap rates have soared from 1.98% in the middle of May to 2.34%, peaking at around 2.5% on June 11.

Mr Cook said there was generally a 10-day lag between a steep increase in swap rates and lenders increasing their mortgage rates, as groups are currently buying only small tranches of funds through the wholesale markets.

Average margins on two-year fixed-rate mortgages are now three times higher than they were before the credit crunch struck at 2.58%, compared with a historical average of around 0.8%.

Big margins. I'm not sure whether we'll get to to 6% though.

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The Spring Bounce has ended with the Summer Solstice. Interest rates are climbing, unemployment is rising relentlessly, and when the weather changes, the nights start drawing in and the brief flurry of cash-heavy buyers withdraw indoors for the Winter, thed crash will resume in earnest.

Expect falls of 2% a month from September until around April 2010, when I believe we will be nearing the end, although prices will probably fall by 5% over the following year.

I may buy early next year, but it's a moveable feast and I continue to wait and watch.

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A few of the well known bulls think mortgage rates at 5% over the long term is a reasonable average. :rolleyes:

Base rates are at historical lows and still mortgage rates are pushing 5%.

Anyone getting a mortgage today and not 'stress testing' for 10% is taking a massive risk IMO.

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The Spring Bounce has ended with the Summer Solstice. Interest rates are climbing, unemployment is rising relentlessly, and when the weather changes, the nights start drawing in and the brief flurry of cash-heavy buyers withdraw indoors for the Winter, thed crash will resume in earnest.

Expect falls of 2% a month from September until around April 2010, when I believe we will be nearing the end, although prices will probably fall by 5% over the following year.

I may buy early next year, but it's a moveable feast and I continue to wait and watch.

Pretty much sums up my thoughts on the situation too. The temporary (relative) optimism of the past couple of weeks will quickly give way to bearishness starting late August and lasting well into the winter. Possible turnaround only next spring.

So my house purchasing is on hold for now!

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When did cost price/base rate ever link with selling price/margin.

Supply and demand...if enough people want it and want to pay for it, they will have to pay for it. ;):P

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A few of the well known bulls think mortgage rates at 5% over the long term is a reasonable average. :rolleyes:

Base rates are at historical lows and still mortgage rates are pushing 5%.

Anyone getting a mortgage today and not 'stress testing' for 10% is taking a massive risk IMO.

Very valid point - the few people in my 'circle' who are in the proccess of buying ,seem to overlook the fact that to stretch yourself now , with base rate at 0.5 is simply madness.

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Too many people are wanting to buy houses so interest rates have to go up to ration what funds they have.

Yes, the essential point for bulls to grasp is that the banks cannot lend out any money until they get the last lot back.

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Very valid point - the few people in my 'circle' who are in the proccess of buying ,seem to overlook the fact that to stretch yourself now , with base rate at 0.5 is simply madness.

How many 'green shoot' articles have you heard saying that now is a great time to buy ?

Many of them point out that interest rates are at historical lows.. :blink:

Surely that is a negative rather than a positive ? Unless you can get a 25 year fix at 0.5% of course.

Hell - I would even consider getting a place on that deal, and becoming the next Bovey.

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Very valid point - the few people in my 'circle' who are in the proccess of buying ,seem to overlook the fact that to stretch yourself now , with base rate at 0.5 is simply madness.

A work colleague has done this bought their first home, took out a tracker as it was the cheapest option but have no room for manoeuvre if rates increase. :blink:

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How many 'green shoot' articles have you heard saying that now is a great time to buy ?

Many of them point out that interest rates are at historical lows.. :blink:

Surely that is a negative rather than a positive ? Unless you can get a 25 year fix at 0.5% of course.

Hell - I would even consider getting a place on that deal, and becoming the next Bovey.

Except the banks have alot of debt to pay back...if you want it you had better be a good risk and be prepared to pay for it. :o

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A few of the well known bulls think mortgage rates at 5% over the long term is a reasonable average. :rolleyes:

Base rates are at historical lows and still mortgage rates are pushing 5%.

Anyone getting a mortgage today and not 'stress testing' for 10% is taking a massive risk IMO.

The only part of this I would disagree with is that "stress testing" should involve a scenario whereby interest rates climb to historic highs.

We have already seen mortgage interest rates at 15%+, and that was in a recession far less severe than the one we have to endure now.

It is ludicrous for anyone to imagine that the biggest boom in history will be followed by anything other than the biggest bust in history.

So once again, the floor is yours, bulls.

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The only part of this I would disagree with is that "stress testing" should involve a scenario whereby interest rates climb to historic highs.

We have already seen mortgage interest rates at 15%+, and that was in a recession far less severe than the one we have to endure now.

It is ludicrous for anyone to imagine that the biggest boom in history will be followed by anything other than the biggest bust in history.

So once again, the floor is yours, bulls.

That is the amazing thing though. Some don't even consider how they would pay if it goes above 5-6% :blink:

Good pint about 15% rates though. I always hear people, especially politicians, saying how we will never go back to those rates again.

I would beg to differ. Just a question of when. Could be 5, could be 50. Who knows. Considering a mortgage is usually over 25 years though ? Best to err on the side of caution IMO.

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That is the amazing thing though. Some don't even consider how they would pay if it goes above 5-6% :blink:

Good pint about 15% rates though. I always hear people, especially politicians, saying how we will never go back to those rates again.

I would beg to differ. Just a question of when. Could be 5, could be 50. Who knows. Considering a mortgage is usually over 25 years though ? Best to err on the side of caution IMO.

Higher rates are not such a problem when the amount of borrowing is low....at this point in time even a small rise in interest rates could do a fair amount of damage to the over indebted. ;)

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Anyone getting a mortgage today and not 'stress testing' for 10% is taking a massive risk IMO.

That's a good one to throw at the vendor just before exchange of contracts.

Quote the swop rate trend, & then revalue the property in front of them

assuming the lender isn't way ahead of you ........... after ignoring your (wasted) substantial deposit of course.

Jesus! - what fool would buy residential property at the moment/!!

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The only part of this I would disagree with is that "stress testing" should involve a scenario whereby interest rates climb to historic highs.

We have already seen mortgage interest rates at 15%+, and that was in a recession far less severe than the one we have to endure now.

It is ludicrous for anyone to imagine that the biggest boom in history will be followed by anything other than the biggest bust in history.

So once again, the floor is yours, bulls.

tumbleweed.gif

:rolleyes:

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That is the amazing thing though. Some don't even consider how they would pay if it goes above 5-6% :blink:

Good pint about 15% rates though. I always hear people, especially politicians, saying how we will never go back to those rates again.

I would beg to differ. Just a question of when. Could be 5, could be 50. Who knows. Considering a mortgage is usually over 25 years though ? Best to err on the side of caution IMO.

Hamish is going to be on that like a bitch in heat.

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Andy McQueen, mortgage director at Nationwide, said: "Recent moves by competitors have required us to review the pricing of selected fixed rate mortgages. We are making these changes to ensure we continue to maintain an appropriate mix of business on these products."

Oh dear. NWide's plan to price themselves out of the mortgage market looks to be failing, as everyone else appears to want to be about the same as NWide.

The question is, will this reverse "beggar your neighbour" work, or will the others follow suit again?

Swap rates sound like an excuse from the journo to me. The quote above could be more telling.

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Higher rates are not such a problem when the amount of borrowing is low....at this point in time even a small rise in interest rates could do a fair amount of damage to the over indebted. ;)

I would argue that rates of 5-6% with huge debts are the equivalent of 15%.

Compared to the early 90's how much bigger is the avg mortgage?

2x

3x

4x

5x

More?

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Higher rates are not such a problem when the amount of borrowing is low....at this point in time even a small rise in interest rates could do a fair amount of damage to the over indebted. ;)

Very true. The whole market was creaking at about 5.5% - before the great leader Broon stepped in to save the day.

Can you imagine mortgage rates in the UK at about 8% :ph34r:

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People who took out fixed rates 3-5 yrs ago at 5-6%, who have >25% equity are now coming off the fix onto an SVR of <4%. Remortgage activity is dead. Forget the fixed rate, it's the SVR that's important at the moment, and it's at it's lowest ever.

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