Nationwide makes profit despite limiting its base rate

Nationwide Building Society’s pledge to not increase its base mortgage rate by more than 2% over the Bank of England base rate has cost it £300m in the first half of the year.

Despite this, the society revealed a 26% jump in profits in the first half of the year to £147m, an increase of 26% compared with last year’s £117m profit.

About 40% of the society’s mortgage book is currently on its BMR, its equivalent of an SVR.

Until April 2009 the society had pledged not to increase it by more than 2% above the base rate, after which mortgage customers revert to its standard mortgage rate of base rate plus 3.49%. It estimates the cost of maintaining it at this level has been around £300m for the first six months of the year.

The society saw gross residential mortgage lending of £6bn in the first six months of this year, which represented an 8.5% market share.