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Britain’s biggest building society said it will raise some of its mortgage rates from Friday due to the current economic outlook.

Nationwide announced that rates on new fixed business will rise by up to 0.45 percentage points.

It comes amid expectations that the Bank of England will have to raise interest rates further than previously thought.

Lenders including Santander and Alifax have also recently raised their rates, and experts expect others to follow.

The Bank of England has raised interest rates in the UK to try to tame rising inflation, the rate at which prices rise.

Rates appeared to be nearing their peak, but his weekly official figures showed UK inflation slowed by less than expected to 8.7% in April.

Markets now think the Bank could raise rates above their current level of 4.5% to as much as 5.5%.

Lenders are now taking note of this week’s developments, with Nationwide saying it is raising its mortgage rates to ensure they “remain sustainable”.

  • First-time buyers and those looking to relocate will face an increase of 0.40 percentage points on mortgages up to 90% and 95% loan-to-value (LTV).
  • Remortgagers will see an increase of between 0.05 percentage points and 0.40 percentage points on products up to 90% LTV.
  • Rates for switching, top-up borrowing and moving existing customers will rise by between 0.05 percentage points and 0.45 percentage points, while equity rates will rise by up to 0.45 percentage points.

Other lenders also raised rates or pulled products from the market in response to this week’s inflation figure, according to financial data firm Moneifacts.

It said the average two-year fixed rate mortgage in the market is now 5.34 percent and the average five-year mortgage is 5.01 percent.

At the beginning of April, these figures were 5.35% and 5.05%, respectively.

Mark Harris, chief executive of mortgage broker SPF Private Clients, told news agency PA: “Markets have reacted negatively based on expectations of where inflation will be so far, versus reality.

However, he said markets had been consistently wrong about the outlook for interest rates and the latest hikes were likely to be a “knee-jerk reaction” that has subsided.

“We remain confident that mortgage rates will soon peak and that the reductions, when they come, will be as rapid as the recent increases,” he said.

Rachel Springall, finance expert at Moneifacts, says lenders often adjust their rates during times of economic uncertainty.

“Just a few weeks ago, fixed mortgage rates were expected to decline over the next few months, but it is impossible to predict such rate movements as prices are determined by fluctuating exchange rates and lenders’ appetite for business.”

Earlier this week, the boss of Barclays warned that UK homeowners and renters were facing a “massive income shock” as rising interest rates hit mortgages and monthly costs.

CS Venkatakrishnan, who is known as Venkat, estimates that payments from mortgage holders and tenants will take between 28% and 30% of their income.

He said that compared to an average of 20 percent in previous years.

By Editor

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