Rise in Nationwide's mortgage rates

Britain's biggest building society has announced plans to push up its mortgage rates for new borrowers.

Nationwide is making increases of 0.3 percentage points on some of its fixed-rate products from Wednesday and 0.2 percentage points on tracker mortgages.

Borrowers who are already with Nationwide and choose to stay with the society for their next deal will be offered rates priced at 0.1 percentage points below the new products, meaning they face a softer blow than new customers.

The increased rates come despite the Bank of England and the Treasury's recently-launched "funding for lending" scheme, aimed at unclogging the flow of credit.

And they will not bring much comfort to people looking to switch from other lenders who have also been hiking their rates, blaming the weak economy and the increased cost of funding a mortgage.

Clare Francis, a mortgage expert at comparison website MoneySupermarket, said: "The rates are going up and that's disappointing. The funding for lending initiative is aimed to get banks and building societies to lend. The hope was that it would result, perhaps, in increases in higher loan-to-value mortgage numbers and so far there is little evidence that is happening."

Lenders generally have also been tightening their borrowing criteria, making it tougher for borrowers to switch deals and those with lower amounts of equity are expected to have a particularly difficult time.

Santander recently announced plans to raise the standard variable rate on its mortgages in a move which means hundreds of thousands of its existing customers face mortgage hikes from this autumn. More than a million home owners saw their rates increase in May when a string of lenders imposed rate hikes.

Nationwide offered an estimated £17.1 billion in mortgage lending last year and increased its share of the market to 12.1%, from 9% in 2010, according to figures from the Council of Mortgage Lenders. It was the joint third largest mortgage lender last year, alongside Barclays.

A spokesman for Nationwide said the increases to its rates had been made to keep the lender in line with the rest of the market and its products remain competitive. Its NewBuy and four-year fixed rates will remain unchanged.