Wells Fargo and Capital One, which provide mortgage lending to many consumers, are raising rates for their specialty loan servicing products.
The company’s new product, the Wells Fargo Mortgage Credit Protection Program, will be available to consumers who qualify, and the credit protection program will have an average annual payment of $500, up from the $500 per year previously.
Capital One said it plans to offer credit protection for $2,500 a year for customers with a $10,000 down payment, up to a maximum of $5,000.
“We have a large portfolio of credit protection products to offer consumers, and we know that there are a lot of customers who might want to take advantage of this additional protection, so we’re extending our credit protection to all of our credit products, and will be adding the credit guarantee to all credit products in the coming weeks,” John Sullivan, senior vice president of corporate communications at Capital One told Recode.
Capital one also said it will offer $500 monthly fees for credit cards, up up from $250 for current customers.
Interest rates on these products are currently at 2.4%, up from 2.2% in April.
Capitalone said it expects to raise rates on all other Wells Fargo products, including mortgages, credit cards and other credit products.
Interest on a $1,000 home loan will increase from 5.3% to 7.2%, and the mortgage rate on a new home loan from 3.8% to 4.8%, up slightly from 3% to 3.9%.
Rates on the mortgage product that Wells Fargo offers will also increase from 2% to 2.5%, Sullivan said.
“With rates at this level, many consumers are choosing to make a down payment of more than their monthly income,” he said.
Wells Fargo said it is working with banks and credit card companies to improve the credit coverage offered on its loans, and Capital First will be able to offer the credit Protection Program to its new mortgage products.
Sullivan said Capital One expects to have rates on its new mortgages, as well as the Wells Credit Protection Plan, on the increase list by the end of the week.
Interest rate hikes were a feature of the Affordable Care Act, which was passed in 2010, and were one of the reasons why many consumers chose to take out a loan, Sullivan said, noting that rates on Wells Fargo’s loans were much lower than on other consumer loans, like the auto loans.
“As the cost of insurance is going up, we expect consumers to start looking for alternatives to their existing mortgage,” Sullivan said in an email.
The average annual interest rate on Capital One’s mortgage product will increase by 5.2 percentage points, from 5% to 6.2%.
The credit protection on Capital one’s mortgage products will be up from 5%.
Sullivan said that the company is working to get the rates on the new mortgage product on the same side of the table as the mortgage products on the Affordable Act’s other consumer products.
He said that “our goal is to continue to grow the rate of our products and the consumer protections in place on our mortgage products as we look to compete in the credit marketplace.”
Sullivan said he was not aware of any plans for Capital One to offer new loans for the same amount of money as the new Wells Fargo mortgage product, and that the cost savings is primarily due to capital gains, not a loss.
CapitalOne said it has no plans to raise the interest rate for existing Wells Fargo mortgages on existing customers, but is looking into adding that feature.
Sullivan noted that some of the credit protections offered by Capital One have lower annual fees, but that Capital One is working closely with banks on how they can provide greater value to its customers, and to offer more options for consumers.