Nationwide lifts cost of fixed-rate mortgages

THE RAPIDLY rising cost of fixed-interest mortgages was underlined by Nationwide Building Society yesterday when it added 0.7 percentage points to the cost of a three- year loan.

The society also reintroduced its five-year mortgage, withdrawn on 22 February when rates in the money markets were rising sharply, at a new level 1.54 percentage points higher - a sign of the startling change of sentiment in the fixed-rate market.

The new three-year rate is 7.69 per cent for borrowers on 95 per cent mortgages, or 7.49 per cent for those able to put up at least a 15 per cent deposit. For a five-year mortgage the rate is 8.79 per cent.

Last Friday, the Halifax and Abbey National blamed a rise in money market rates for increases in their fixed rates. Halifax's five-year mortgage rose from 7.75 per cent to 8.85 per cent, while Abbey National announced similar rises but pitched its mortgages slightly lower.

Dennis Brockwell, divisional director of marketing at Nationwide, made clear the society wanted to encourage variable- rate mortgages.

Variable-rate mortgages are funded from savers' money while fixed mortgages are backed by money market borrowing. Despite the fall in bank base rates to 5.25 per cent, building societies raised the cost of fixed-rate mortgages to meet higher costs in the money markets.