Nationwide hikes fixed rate mortgages

By Jennifer Hill

LONDON (Reuters) - Nationwide, Britain's second largest mortgage lender, said on Monday it would hike the cost of some of its mortgages by up to half a percentage point, just a month after it cut rates to lure in new customers.

The lender said it would raise fixed rate mortgages by between 0.25 and 0.50 percent from Tuesday, following a steep increase in money market rates.

That will take its most expensive fixed rate to 7.85 percent -- on a two-year fee-free loan for remortgages of 90-95 percent of the property's value.

Nationwide will also increase tracker rates by 0.20 percent, in a move that takes its two-year tracker to up to 6.85 percent, 1.85 percent above the current Bank of England base rate.

The changes come almost a month exactly after the lender cut the cost of some of its fixed rate loans by up to 0.30 percent.

That had been possible due to falling swap rates, which are used to price fixed rate lending.

But Melanie Bien, a director of independent mortgage broker Savills Private Finance, said: "Swaps have since jumped following the Bank of England's gloomy inflation outlook which means that interest rates are unlikely to fall anytime soon -- indeed, the next move may be upwards.

"Borrowers who see a rate they like the look of should move quickly to secure it."