Britain's Nationwide raises mortgage rates

LONDON, June 2 (Reuters) - Britain's second-largest mortgage lender Nationwide has raised rates on its fixed-rate home loans by up to 0.3 percentage points on the back of rising costs, and warned consumers to expect volatility as markets remain unsettled.

The building society said on Monday it had passed on the impact of lower interest rates to its tracker rates, but said rising money-market swap rates had forced it go back on a decision last month to trim some of its fixed-rate loans.

The swaps are derivative contracts whose moves broadly reflect changes in interest rate expectations and the cost of borrowing.

"Swap rates have risen significantly in the last few weeks and as a result it has been necessary to increase the rates on our fixed rate mortgages," Matthew Carter, divisional director for mortgages at Nationwide, said.

"While markets remain volatile we can expect to see frequent changes to fixed rates across the industry."

The decision follows a move by rival Abbey, owned by Spain's Santander (SAN.MC), which last week raised rates on some fixed-rate mortgages by up to 0.44 percentage points on the back of rising borrowing costs, just a week after announcing cuts to lure new clients.

Nationwide's changes are effective from June 3. (Reporting by Clara Ferreira-Marques)