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Nationwide base rate mortgage pledge costs firm £300m

Nationwide has revealed that its pledge to cap the base mortgage rate 2 per cent above Bank of England base rate has cost the firm £300m in the six months to September 30, 2010.

Nationwide says that with base rate currently at 0.5 per cent there is less incentive for borrowers to move product and that BMR balances have subsequently increased.

The building society is also continuing to waive the contractual floor on tracker mortgages of 2.75 per cent. The floor has been lowered to 2 per cent, a move the group says has saved its members £34m in the mortgage market over the six month period.

The news comes as Nationwide reveals a 26 per cent jump in profits in the first half of its financial year.

Nationwide saw gross residential mortgage lending of £6bn in the first six months, an 8.5 per cent market share.

Nationwide chief executive Graham Beale says: “In mortgages we have preserved our position, with a gross lending market share of 8.5 per cent, and are working hard to keep the housing market moving against a backdrop of subdued conditions. We have simplified our product range and we have honoured our BMR pledge, with the majority of our existing mortgage customers on a rate which is capped at 2 per cent above the BoE base rate. Other mortgage customers have benefitted from our waiver of the contractual floor of 2.75 per cent on tracker mortgages.”

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