Homeowners on expensive long-term mortgages have been banned from switching to cheaper loans mid-way through their deals by Nationwide Building Society.

Under a new rule introduced by the country's biggest mutual, customers who wish to pay an early redemption charge on an existing fixed deal will no longer be allowed to take out another Nationwide loan. This will force them to remortgage with another lender.

Halifax, the UK's biggest lender, is also making life tougher for existing borrowers who want to switch before their special deal ends, a move designed to deter customers from switching to a cheaper rate. It has announced that from tomorrow, early redemption charges have to be paid upfront rather than rolled into a new remortgage deal.

Experts warn that other banks and building societies could follow suit. The steep fall in the cost of borrowing in the last six months has made it cost effective for some borrowers stuck on expensive long-term deals to pay an exit fee, typically around 3 per cent. The cheaper rates available on new mortgages mean the savings made by switching outweigh the penalty charge.

The average interest rate on a two-year fix has fallen from 6.29 per cent in August last year to 4.64 per cent today, according to Moneyfacts.co.uk, the financial website. Borrowers with perfect credit histories and at least a 40 per cent deposit can obtain mortgage rates of just 2.89 per cent.

Mortgage brokers say existing Nationwide customers have been particularly keen to break their mortgage contract.

Richard Morea, of London & Country Mortgages, the broker, said: "More than a third of the enquires that we have received from customers paying early redemption charges to switch deals have been with Nationwide. The charges are lower than other lenders so it is a more attractive option."

Nationwide charges are on a sliding scale from 3 per cent down to only 1 per cent. An early redemption charge of 3 per cent on a mortgage of £150,000 would be £4,500.

Melanie Bien, of Savills Private Finance, a broker, said: "Nationwide is trying to close what it sees as a loophole which allows borrowers to switch deals. We've had a number of new clients who took out expensive fixes last summer hoping to benefit from cheaper rates. There are quite a few mortgage customers who would like to switch onto Nationwide's standard variable rate but it is not available to new customers."

Nationwide's standard variable rate is 2.5 per cent, however the mutual stopped new customers opting to take out a loan at its SVR in December last year.

Nationwide said that nothing in its mortgage contracts requires it to offer new mortgage deals to customers who pay an early redemption charge on their existing deals. It said the cost of closing a mortgage contract is more than the penalty fee paid by borrowers.

A spokesman said: "At the present time we are not allowing customers to pay an ERC and transfer to another product. We set out ERCs in very different market conditions and the cost of refinancing is now considerably higher."