Nationwide announced this morning that they will cut rates on selected fixed term mortgages adding yet more fuel to the fire that an increase in interest rates is due this week.
At the end of September, Nationwide was one of the first lenders to hike mortgage rates by 0.25% on two year fixed rates and the bank will now cut fixed-rate mortgages as of October 31st, in a push to give new and existing customers the chance to ensure competitive rates.
Ten year fixed rate products will enjoy the largest reduction of 0.5%, but two and five year fixed rates will also be reduced.
Tracker products and share equity mortgages will also see rate reductions. In addition, existing customers who are looking to switch products will be gifted £100 cashback for their loyalty.
While Nationwide may be encouraging an air of panic buying among UK homeowners and buyers, it is important to note that rates will continue to remain low and so rushing into a decision as large as a mortgage or remortgage of a home is not advised and probably not needed in the current market climate.Russell Quirk
What does an increase in interest rates mean for the UK market?
UK homeowners have enjoyed record low interest rates since they were slashed to 0.5% in 2009 and then further squeezed to 0.25% after the EU Referendum. But with the economy out performing wider predictions, it is highly likely that his Thursday interest rates will once again increase.
We highlighted that if rates do increase, UK homeowners have little to worry about as the result is unlikely to impact them financially.
If interest rates do increase this week, it is likely to be marginal to say the least and probably no higher than a return to 0.5%, which is actually the norm.
This slight hike is designed to counter the rising level of inflation and will increase the monthly cost of some mortgages, in particular variable rate loans and tracker deals.
But any increase in monthly payments, like interest rates themselves, will be marginal and manageable for those impacted. On the typical £150,000 loan homeowners will be out of pocket around £15 to £30 a month, certainly no grounds to shout, ‘financial meltdown’.
I’m old enough to remember the unprecedented cost of money at a whopping 15% in 1989, resulting in homeowners posting their keys back to banks through their letterboxes. We’re leagues away from such a suffocating level and must not mistake this week’s likely tweak with anything more sinister or prohibitive.
House price growth and the market’s overall stability have been incredibly resilient despite the EU vote and a snap general election. A few quid added to the average mortgage repayment will not deter this growth in the medium to long term.Russell Quirk