Banks triple profit margin

April 14, 2009 by Brendan

News

This week, the banks have come under fire once again as they are accused of profiteering in this difficult economic period as they triple their profit margins.

Despite handouts of billions of pounds from the government, banks appear to be ignoring government efforts to encourage reasonably-priced borrowing to help stimulate our economy.

The Bank of England (BoE) has reduced the base interest rate from 5 per cent in October last year to just 0.5 per cent now and yet the average difference between the base rate and the tracker interest rates charged by banks has increased from 1.18 per cent on average to 3.20 per cent today according to Moneyfacts.co.uk.

Michelle Slade, analyst at Moneyfacts.co.uk, said: “Since base rate started falling in October 2008, mortgage lenders have continued to increase their margins. While existing tracker customers have benefited, anyone looking for a new tracker deal has seen the margin over base continue to increase. The vast majority of providers have passed much bigger cuts to their savings rates, when compared to their standard variable rate as once again they increase their margins.”

Although borrowers with existing tracker rates may have benefited from the drop in the BoE’s base rate, new borrowers are paying a high price unless they are lucky enough to have a substantial deposit.