Nationwide pass on the full 0.5%

Ian_Griffiths_Halifax

From Mortgage Introducer.

Friday 9th January 2009

High street lender Nationwide has announced it is set to pass on the Bank of England's base rate cut in full to its base mortgage rate (BMR) customers.

As a result of the BMR reduction – Nationwide's equivalent of the standard variable rate (SVR) – a borrower with the building society on a £150,000 interest-only mortgage could save up to £62 per month.

Nationwide subsidiaries Derbyshire and Cheshire building societies will also see their SVR drop to 3.5 per cent on February 1st.

Meanwhile, the mortgage lender has reiterated that its BMR will never be more than two per cent above the base rate, adding that further rate cuts will also be passed on in full.

The building society said: "Nationwide is one of a few lenders to have this type of guarantee in place."

Earlier this week, Nationwide claimed that house prices fell by 15.9 per cent last year – the biggest fall since 1991.

luckyfool

No surprise as Nationwide contractually have committed to their BMR being no more than 2% above bank base rate (same with C&G).

Ian_Griffiths_Halifax

luckyfool wrote: »

No surprise as Nationwide contractually have committed to their BMR being no more than 2% above bank base rate (same with C&G).

If you're referring to their recent announcement, then that's not the case. It's not contractural, it's voluntary. They voluntarily said they would remove the Floor on their Trackers but have gone back on that and replaced this with the 2% you mentioned.

Other than that, the only contractural ones they have, are the ones with the 2% max above Base Rate in their KFI/Offer.

Bargain_Rzl

Ian_Griffiths_Halifax wrote: »

If you're referring to their recent announcement, then that's not the case. It's not contractural, it's voluntary. They voluntarily said they would remove the Floor on their Trackers but have gone back on that and replaced this with the 2% you mentioned.

That's not entirely right either

The 2% you're talking about is the floor/collar which is now being imposed upon tracker customers (i.e. somebody on base rate + 1% will now be paying 3%), replacing the 2.75% collar which Nationwide chose not to impose.

The 2% which luckyfool mentioned is the pledge that Nationwide's SVR will never be higher than 2% above BoE base rate (which, as you say, Nationwide is not obliged contractually to honour, given that most customers on SVR will have had the 2.75% floor in their terms and conditions).

I'm on their SVR and had been fully expecting and budgeting for my interest rate to be stuck on 4.75% once the base rate dropped below 2.75%. I'm personally very pleased that this is not the case.

luckyfool

The KFI's on trackers show a collar/floor of 2.75%, that is true. The floor/collar has zip to do with their Base Mortgage Rate. They have committed to their BMR being no more than 2% above base rate without any caveats or talk of collars or floors. At least that is my understanding

Ian_Griffiths_Halifax

I'm a teapot, I'm a teapot.

Bargain_Rzl

My understanding of Nationwide's BMR is that it acts like a tracker, tracking the BoE base rate. Of course this is only nominally the case, given that up to the +2% tracking ceiling, Nationwide have the freedom to say how much it tracks base rate at. So if it's tracking at +1% and the BoE base rate goes from 4% to 3.5%, Nationwide could get out of passing on the cut simply by increasing the tracking margin the 1.5%.

The Nationwide website definitely stated until very recently that the +2% limit was (like their other trackers at the time) subject to a collar of a base rate of 2.75%. However, I haven't checked my mortgage documents to find out whether it's part of the contract.

Ian_Griffiths_Halifax

Bargain_Rzl wrote: »

That's not entirely right either

The 2% you're talking about is the floor/collar which is now being imposed upon tracker customers (i.e. somebody on base rate + 1% will now be paying 3%), replacing the 2.75% collar which Nationwide chose not to impose.

The 2% which luckyfool mentioned is the pledge that Nationwide's SVR will never be higher than 2% above BoE base rate (which, as you say, Nationwide is not obliged contractually to honour, given that most customers on SVR will have had the 2.75% floor in their terms and conditions).

I'm on their SVR and had been fully expecting and budgeting for my interest rate to be stuck on 4.75% once the base rate dropped below 2.75%. I'm personally very pleased that this is not the case.

No, I said IF luckyfool was referring to their recent announcement. By this I was referring to their announcement re the 2% floor. As he wasn't, then forget what I said :rotfl: