New 3 year capped trackers from Nationwide
Posted on 21 July 2009 by
I wouldn’t normally comment on each of the new products in a lender’s range but as my previous blogs on Nationwide’s new 1 and 4 year fixes have generated significant interest today, now that I have full details of its new 3 year capped trackers, for the sake of completeness I will also comment on them.
The capped trackers are only available to existing customers not moving home and so the most obvious comparison is with Nationwide’s product transfer 3 year fixed rate and I prefer the existing very competitive 3 year fix to the new capped tracker.
The capped tracker is Bank Rate + 3.49%, capped at 4.99%, with a fee of £699 up to £150,000 and £1,499 above £150,000 up to its maximum loan size of £500,000, whereas the fixed rate is 4.49% with a fee of £995. If Bank Rate averages more than 1% over the 3 years, which it probably will, the fixed rate will work out cheaper. Hence my preference for the fixed rate. Borrowers who are happy with a variable rate and don’t need or want the interest rate protection offered by a fixed or capped rate should stay on Nationwide’s 2.5% SVR rather than move to a tracker at 3.99%, even with a 4.99% cap.
A big plus with both these deals, which are only available to existing customers not moving home, is that they are available at the same rate up all the way up to 95% LTV. The existing 4.49% fixed rate is excellent value at all LTVs and is superb value above 75% LTV.
The 3 year swap rate closed yesterday at 2.88%, with the 4 year rate 0.45% higher at 3.33% and the 5 year rate a further 0.28% higher. However, Nationwide’s cheapest 4 year fix for product transfers, which is only available up to 60% LTV, is 5.58%, which is 1.09% higher than its 3 year rate, with the cheapest 5 year rate another 0.28% higher at 5.84%. Thus whilst the pricing spread between its 4 and 5 year fixed mortgage rates is in line with swap rates the premium payable to get a 4 year fix compared to a 3 year fix jumps so far in excess of the swap rate differential that with current pricing the 3 year fixed rate stands out as offering better value.
For shorter term fixed rates up to 3 years Nationwide offers lower rates for product transfers than it does for purchases or remortgages, and also commendably offers a single rate all the way up to 95% LTV. However, for longer terms the product transfer rates are in line with the remortgage rates, which are higher than the purchase rates, and are tiered, based on LTV. Clearly Nationwide has a very different pricing strategy for product transfers up to 3 years compared to longer periods.
Categories: Mortgages, Interest rates
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