According to recently released figures the prices on home loans in the UK are continuing to increase even though the base interest rate has now been at record lows of 0.5 percent for many months.

Whilst banks are now paying less for their own borrowing figures from the Bank of England have suggested that the cost of three year and five year fixed rate mortgages has increased, indicating that banks are cashing in on the situation by charging borrowers more even though their own borrowing costs have fallen.

As an example on recent report illustrated how banks were making nearly £800 extra a year on a £150,000 mortgage compared to January of this year when the base interest rate was higher than it is now.

Figures from the Bank of England show that at the end of July the average rate on a five year fixed rate mortgage stood at around 5.68 percent but at the end of August the average rate had increased to 5.72 percent.

However, the amount banks are paying to borrow the money themselves is far lower, as they are paying 3.3 percent to borrow money for a five year loan and 2.6 percent to borrow money for a three year loan.

With tracker mortgages the banks pay only 0.7 percent to borrow the money themselves, but they are then charging borrowers an average of 3.84 percent, which is a huge margin.

One industry expert said: ‘There is a desire from lenders to increase their profitability and a desire not to lend. One reason for these increases are that banks have little room to manoeuvre because they have lots of customers on old rates that they are not making much money from. As a result, they have to make the profitability back on the new deals they make available.’

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