The Nationwide, Britain’s largest building society, shocked the market yesterday when it announced it would be breaking its promise and hiking its standard rate mortgage. The question now is, will rivals follow suit or take the moral high road?
The Nationwide had always promised that customers on the standard rate would not pay more than two per cent above the Bank of England (BoE) base interest rate. It’s current standard rate mortgage is 2.5 per cent but from Thursday, anyone applying for a mortgage with the Nationwide will have to move onto the new Standard Mortgage Rate once their deal ends. The Standard Mortgage Rate is set to 3.99 per cent to start but has no guarantees so the Nationwide can effectively do what it likes. It doesn’t have to pass on full BoE base rate interest cuts and can hike the interest rate by more than rises in the base interest rate.
Most consumers would not like that uncertainty and we hope they vote with their feet and go elsewhere for their mortgages.
Jackie Lawrence, from Nationwide, said: “This move will give us the chance to develop more competitive products over time. This is all about balancing the needs of our savers and our borrowers, which has become ever more tricky in the current climate. We feel that our one million mortgage customers have had a boost for some time now, and this will give us a chance to give something back to our 10.4million savers.”