A&L and Nationwide increase fixed-rates

Yesterday’s 0.25% cut in the base rate, to 5%, was greeted by a speedy response from some of the UK’s leading mortgage lenders.

Barclays, Lloyds TSB, HBOS and Nationwide all confirmed that they will reduce their standard variable rates from 1st May, for existing customers.

Even First Direct, the HSBC subsidiary that recently closed its doors to new borrowers, is adjusting its variable rate loans in line with the cut.

However, Alliance & Leicester (A&L) and Nationwide actually increased rates on a number of their most popular fixed-rate products yesterday.

A&L announced a rise of between 0.2% and 0.3% on fixed-rate deals, having already applied a 0.35% increase on Monday of this week.

Nationwide is withdrawing some of its fixed-rate mortgages and increasing rates on others. At the same time, the lender is upping fees on a number of products.

Five and two-year fixed-rate loans are increasing in popularity as confidence in the economy wanes.

The cost of this type of loan is driven by interest swap rates in the money markets, where interest rate exposures are swapped from floating to fixed or vice versa. For this reason, rates cannot be determined by the base rate.

For fixed-rate remortgagers, HSBC is currently offering a lifeline. The bank has promised to match existing rates for homeowners who are at the end of their terms, for a limited period.

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