Nationwide Introduces Euro-Style Mortgage with Sterling Payments

Strategic Insights -

Nationwide Building Society has announced the launch of a mortgage product that links to European interest rates, with payments made in sterling. The new mortgage will be available from 24 March, starting at a discounted rate of 3.75 per cent, which will increase to 4.75 per cent after a year. This rate is significantly lower than Nationwide's discounted variable rate, which starts at 5.15 per cent.

The society has taken advantage of low interest rates on the Continent, which are currently 3 per cent, and will charge its euro-style borrowers 1.75 per cent above the European Central Bank's rates for the next ten years. This new mortgage product is the first in the UK to provide a link to European interest rates with all payments made in sterling, offering borrowers a unique opportunity to benefit from lower interest rates.

Key Takeaways:

  • The new mortgage product will be available from 24 March, starting at a discounted rate of 3.75 per cent, which will increase to 4.75 per cent after a year.
  • The mortgage links to European interest rates, with a 1.75 per cent markup over the European Central Bank's rates for the next ten years.
  • Borrowers will not have to contend with pound-euro exchange rate fluctuations, as Nationwide will bear the exchange rate risks.
  • However, borrowers will be tied to heavy redemption penalties of up to nine months interest repayments if they leave before the ten-year period.
  • The society has made only a limited volume of funds available for this scheme, with mortgages available on a first-come, first-served basis.
  • Nationwide's chief executive, Brian Davis, stated that the society is testing customer reaction to the mortgage offer and may make more funds available for similar products in the near future.

Statistics:

  • European interest rates are currently 3 per cent.
  • Nationwide's new mortgage rate will be 1.75 per cent above the European Central Bank's rates for the next ten years.
  • The mortgage will start at a discounted rate of 3.75 per cent, increasing to 4.75 per cent after a year.
  • The redemption penalty for early redemption is up to nine months interest repayments.

Sources:

  • "Nationwide's mortgage offer is the first in the UK to provide a link to European interest rates with all payments made in sterling." (Source: Nationwide Building Society Press Release)
  • "The society has taken advantage of low interest rates on the Continent, which are currently 3 per cent." (Source: Nationwide Building Society Press Release)
  • "Under the scheme Nationwide will charge its euro-style borrowers 1.75 per cent above the ECB's rates for the next ten years." (Source: Nationwide Building Society Press Release)