According to research from The Daily Mail, the average British home owner is being overcharged by £1,800 every year on their mortgage repayments as a result of banks failing to pass on the cut in interest rates.
The Daily Mail claims that banks are making more profit on mortgage lending now because they have increased loan rates. Chancellor Alistair Darling met with the chiefs of Britain’s banks this week to discuss the manner in which they were pricing their loan deals
According to the Mail, the banking chiefs defended their actions despite a large discrepancy in what they were charging borrowers this time last year for mortgage lending. The Mail claims that in July last year banks were adding 0.5% on most mortgage deals, whereas mortgages today feature an additional 2.61% added to the cost.
Going by these figures, a mortgage of £150,000 would cost the borrower an additional £1,788 each year.
Despite the bate rate falling to 0.5%, and Libor (the exchange rate that banks use to lend money to each other) being under 1%, mortgage rates haven’t fallen by the same amount, which means the margins that the lenders enjoy have increased by as much as 5%.
The Mail adds that the bosses of the major UK banks, including RBS, Barclays, HSBC and Lloyds TSB, will each face City Minister Lord Myners individually to explain their policies on mortgage lending.