personal finance

Nationwide will not pass on full 0.25% interest rate rise to most savers

Nationwide is not passing on last week’s Bank of England’s 0.25% rate rise in full to savers in the first sign that big financial institutions will use the base rate to increase profit margins.

The building society, one of the biggest mortgage and savings institutions in the UK, said that while its tracker mortgage customers will see a 0.25% rise in their payments, many of its savers will see only a 0.1% increase in rates.

Nationwide is the first large player to announce its new rates, in a move likely to be followed by the high street banks.

The society’s base mortgage rate will rise by the full 0.25% from 2.5% to 2.75%, while its standard variable rate will increase from 3.99% to 4.24%.

However, Nationwide’s Loyalty Isa, Flex Isa and Loyalty saver rates will increase by only 0.1% to 1.1%. The rates on instant access accounts will rise by 0.15%, while its Help to Buy Isa will increase by 0.5% to 2.5%.

Nationwide said its savings rates will remain competitive in the market despite rising by less than the base rate increase.

A spokesperson for the building society said: “Nationwide needs to be able to compete effectively in both the savings and mortgage markets.

“Mortgage margins have been compressed and income has reduced over the last 12 months because of the sustained competition in retail lending markets.”

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Banks have typically used rate rises to improve their “net interest margin” – the difference between the rate they lend money and the interest they pay to savers.

Tom Adams, the head of research at Savings Champion, said: “Nationwide’s rates are a strong indication that savers are not going to get the full 0.25% increase from the base rate. In November 2017, when rates went up 0.25%, many providers either did not put rates for savers up at all, or did not pass on the rate increase in full.”

However, some of the smaller building societies have promised to give savers a 0.25% uplift. Kris Brewster, the head of products at Skipton, said: “[We] will be passing on in full the increase to all of our on-sale variable rate savings and mortgage accounts.”

This article was amended on Wednesday 8 August to correct Nationwide’s latest standard variable mortgage rate (originally given as 4.74%) and Help to Buy ISA rate (originally given as 2.25%).


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