Banks 'use credit crunch to milk borrowers of £3bn'

High Street lenders have made the money by raising their mortgage rates and fees over the past year, even though interest rate cuts have made it cheaper for some of them to borrow money.

A new study calculates that the country's five biggest banks - Halifax, HSBC, Barclays, Lloyds TSB and Royal Bank of Scotland - are raking in £2.8billion more from mortgage borrowers compared to last year.

Halifax is one of several large banks to have profited by increasing their mortgage rates and fees

The news is bound to anger homeowners, who have seen budgets coming under massive pressure from rises in food and energy bills  -  and other bank charges.

Figures from the personal finance website Moneyfacts.co.uk  show the average rate on a five-year fixed mortgage have risen by 0.43 per cent to 6.76 per cent since July last year.

However, a key wholesale interest rate used by banks, called the two-year swap rate, fell from 6.29 per cent to 5.66 per cent.

The figures are used in Monday's Channel 4 Dispatches documentary on the credit crunch called How the Banks Never Lose.

On the basis of these figures, banks can potentially make an extra £2.8billion over the course of a year from mortgage customers.

RBS, Barclays and others have lost tens of billions since the credit crunch erupted last August after buying toxic assets linked to low-income U.S. mortgages.

Over the past year banks have raised their borrowing rates and forced through sizeable rises in mortgage arrangement and credit card fees as they try to shore up their battered finances. 

Their sky-high borrowing costs have frozen tens of thousands of first-time buyers out of the property market, putting further pressure on house prices.

Liberal Democrat economics spokesman Vince Cable said: 'The banks are milking overstretched families to make up for their previous mistakes.

'They're trying to have it both ways, squeezing as much as they can out of their customers while running to the government for help.'

Earlier this year Chancellor Alistair Darling threw a £50billion lifeline to the biggest banks by allowing them to swap huge swathes of home loans for iron-clad government bonds. The move was designed to kick-start the property market.

Mr Cable says the Government should hold a wide-ranging probe into the banks' conduct. He said: 'The whole system of bank charging has been brought into disrepute.'

Melanie Bien, of mortgage broker Savills Private Finance, said: 'The banks have been frank about how they want to increase profit margins on their mortgage products, and that's exactly what they're doing.

'Last year there was fierce competition for new business  -  now that's just not the case.'

Recent financial results show banks clawing back their sub-prime losses.

RBS has increased profits at its UK arm by nearly ten per cent, to £1.1billion. Some £158million may have come from higher mortgage charges, according to the survey.

Halifax, Britain's biggest lender, is estimated to have profited by £1.5billion after upping its five-year fixed rate by 0.5 per cent. A spokesman denied using the credit crunch as a smokescreen to raise charges.

He added: 'Today we announced yet another raft of mortgage rate reductions  -  our fifteenth this year. We price in line with the market.'

Halifax to close some estate agent branches

Halifax announced it is closing 53 of its 200 estate agents branches as a result of the housing market downturn.

The closures will lead to up to 100 job cuts, although the group said the majority of staff in the affected branches would be transferred to similar roles in its banks.