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Banks were today accused of profiteering from homeowners during the recession, as it emerged that the average interest charged on variable-rate mortgages is 4.2% higher than the Bank of England's base rate.
The average Standard Variable Rate mortgage now charges interest rates of 4.7%, down only 1% over the past year — when the base rate fell by 2.5%.
Vera Cottrell from consumer watchdog Which? said the variable rate market was “raising serious concerns”.
She said: “Lenders are getting away with charging very high mortgage rates right now, many have an incredibly high margin between base rate and the interest being charged. That's offering consumers a poor deal.”
Which? also said there was “a real danger” that variable rate mortgage holders will face serious repayment difficulties when the base rate goes up.
Mortgage experts at Moneysupermarket said lenders were “increasing their profit margins on deals by not passing on the full base rate cuts or subsequently increasing their rates”. The website said it had seen a “steady increase” in homeowners on variable rate mortgages this year and warned borrowers that lenders price them “as they please”.
Reader views (1)
I think its a great idea for the govt to havea bank (Northern rock NR)on the books. The only way to get banks to drop mortgage rates is to force them down competitively. NR drops its rates and the others are forced to follow. If NR adopted a standard policy of base rate plus 2% then the other banks would also have to do so to be competitive. Cutting interest rates may not work but competgin with the banks for customers at their own game does.
- Greg, UK, 23/11/2009 16:29
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