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Nationwide building society set to increase mortgage rates

As the Nationwide building society gets set to increase interest rates on its more popular mortgage packages, there is serious concern that competitors will be forced to follow suit. Despite the fact that UK base rates have been maintained at 0.5% for some time, and are likely to stay this way after this month's MPC gathering, we have seen mortgage rates trend higher over the last few weeks and months. So what exactly is going on?

Those outside of the financial services industry are at a loss to explain how mortgage providers in the UK feel they are able to increase mortgage rates at a time when interbank lending rates have fallen slightly and UK base rates remain constant. Whether we are seeing a blatant expansion of profit margins, to make up for recent losses, or perhaps liquidity is still difficult to come by in the money markets, remains to be seen. The UK government has been very quiet of late on the subject of mortgages and mortgage interest rates, although privately they will be concerned that liquidity appears to be leaving the marketplace.

The UK housing market has shown sporadic signs of recovery but so far there has been no follow-through both in price rises and investor interest.

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