Homeowners expected to pay £1.3bn bill run up by reckless mortgage lenders
British homeowners will find themselves paying an extra £1.3billion per annum (which calculates roughly at an extra £110 a month in payments) as a result of mortgage lenders’ increased profit margins in an attempt to recover some of their losses which have arisen as the result of bad debts.
Statistics show that lenders have increased their margin fourfold within this last year - a move which consumer groups have called “reckless” and accuse banks of “plundering” homeowners.
Chief executive of the Independent Banking Advisory Service says, “They all got into this position and now the customer is going to pay for it.”
The Deutsche Bank have compiled the new figures and they have analysed the margin between the rate at which the lending company borrows money and the fixed-rate deals it offers. There are even examples whereby the margin has increased eightfold in a year.
Take the example of a homeowner in 2007 who was on a standard 2year fixed-rate deal with a small deposit. Typically they would have aid an interest rate a mere 0.2% higher than the rate at which their lender borrowed the money. Now, that mark-up has increased to more than 1.6%.
This increase is not good news for the estimated 1.4m homeowners whose fixed-rate deals are about to finish this year. The selection of mortgage products available has been considerably reduced and despite falling interest rates, they will be more than likely to have bigger monthly repayments.
Only a year ago, Halifax was so keen to attract new business that it offered a 2 year fixed-rate deal at 5.14% This figure was actually lower than the rate at which it could borrow the money (which was 5.64% at the time). Now the “swap rate” (which is the cost of borrowing for lenders for fixed-rate deals) has been lowered to 4.89%, yet Halifax’s 2 year deal is currently stands at 5.99%.
Homeowners expected to pay £1.3bn bill run up by reckless mortgage lenders
Tags: homeowners, mortgage, lenders