Mortgage customers being exploited by banks claims report
A recent report has claimed that many of the UK’s banks are exploiting their mortgage customers, with the banks’ profit margins soaring to the highest levels seen since the onset of the global credit crunch.
Despite historically low base interest rates banks have seen sharp increases in profits on fixed rate mortgages. The base interest rate is now at just 0.5 percent, which is the lowest level in the history of the Bank of England. However, the average the average two year fixed rate deal stands at around 4.63 percent.
This has left many people hoping to get onto the property ladder whilst the base rate is so low unable to find a mortgage that they can afford the repayments on.
It has also caused difficulties for existing homeowners looking to remortgage to a cheaper deal whilst the base rate is low, as many find themselves facing repossession if they cannot find a cheaper deal that provides them with increased affordability. It is claimed that thousands of new customers and existing homeowners have been affected by this exploitation.
It has also been suggested that over the course of this year the gap between Libor rates and the rates that banks are charging customers have widened significantly.
One industry official said: “In the last few weeks, the differential has gradually crept up against a background of static Bank of England rate. This obviously shows lenders taking advantage of the low interest rate environment to boost profit at the expense of borrowers.”
One economist stated: “The falling level of interbank lending rates has been an encouraging aspect of the recent improvement in conditions in both financial markets and the wider economy. Unfortunately, there is limited evidence that lenders are passing on this drop in their funding costs to borrowers.”
The British Banker’s Assocation said: “Banks are currently providing around two out of three new mortgages. They price home loans competitively and will build into that figure not just the current interbank lending rates but other elements such as risk. Customers should shop around to find the loan which best suits their needs”
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