Banks urged to stop profiteering

OVER A MILLION MORTGAGE HOLDERS DUE TO LOSE OUT AS BANKS POCKET AN EXTRA TWENTY ONE MILLION PER MONTH

Banks are urged to stop profiteering - as they look to make an extra £20.1 million pounds per month from unsuspecting mortgage customers who are coming off fixed, discounted, tracker and capped rate deals and moving onto standard variable rates.  Despite an unprecedented low base rate of 0.5 per cent and an all time low LIBOR, banks are failing to pass on the full benefits to its customers.

While, banks have dramatically cut savings rates to an average rate of 0.58 per cent, the average SVR on mortgages is a whopping 4.66 per cent above base rate, compared to only 1.9% per cent in Q2 2008 – representing a 145 per cent increase in income in just 12 months.

Richard Mason of Moneyextra.com said, "This is blatant profiteering by our banks, they are shoring up their balance sheets by charging huge rates for existing borrowers, but offering tiny rates to savers. While a lot of deluded customers have recently taken advantage of a reduction in their monthly mortgage payments, what they fail to understand is that the full benefits of the rate cuts are not being passed to them; savers are also facing a poor return as banks waste no time cutting their rates. Consumers are being treated like profit-fodder as banks prey on their lack of financial understanding."

Table of top five worst offenders:

Data provided by Moneyextra.com. Correct as of 3^rd June 2009.based on an Instant Access Saving Account - no withdrawal penalties or fixed period bonus

Recent research carried out by Moneyextra.com reveals that the majority of people believe their mortgage lenders have dropped their SVR’s inline with base rate, with homeowners believing that their lenders’ SVR is on average 1.77 per cent. Only five per cent of people surveyed guessed that average SVR rates are currently between four and four and a half per cent above base rate.

It seems banks could also be benefitting from people’s lack of understanding of what a ‘standard variable rate’ is; a whopping 85 per cent of users surveyed were wholly unfamiliar with the term ‘SVR’. One user amusingly cited the meaning of SVR as ‘saving for retirement’.  

Six out of ten 64 per cent mortgage holders have expressed concerned about what will happen to them and their finances once their fixed deal comes to an end.  A third 33.5 per cent is unemployed or has suffered a recent drop in income; and these mortgage holders are made especially vulnerable by their lenders’ high SVR.  Ten per cent believe their poor credit rating could prevent them from  securing a new mortgage deal; another seventeen per cent reported that high personal debt on credit cards and loans has created additional pressure; and one in ten cite a struggle with negative equity.

Richard Mason, managing director at Moneyextra.com, comments: "Typically, SVR’s from prime lenders are never normally higher than one or two percentage points above bank base rate; however, some SVR’s are currently as high as 5.99 per cent. Such a high-margin is unheard of; and, quite frankly, it is scandalous that lenders are allowed to continue to fleece their customers. It’s not unreasonable for mortgage holders to expect that if the base rate drops, so too will their lender’s rates decrease – however current SVR’s are entirely out of proportion and we implore the banks to bring down their extortionate lending rates to a level that is fair and just to the consumer. We urge all customers who are coming off fixed rates to clean up their credit record and shop around for a good deal."

Mason offers his top tips to unsuspecting homeowners:

• Make sure you know your mortgage rate and its duration so that you can take advantage of another discounted rate as soon as it ends.
• Clean up your credit record. Currently there are only 34 2.4% of the market mortgage deals available to buyers who have less than 10% deposit. You will, however, need a good credit history to take advantage of one of them.
• If you are struggling to get credit, why not consider finding a guarantor or sharing with siblings or friends? Pooling your money will enable you to get a better mortgage deal.
• Always shop around. If you have a reasonably sized deposit, lenders are typically more flexible and can offer great incentives.
• Do not despair – there are still some good deals to be had. Clydesdale Bank has a two year fixed rate mortgage at 3.79 per cent with a 25 per cent deposit.

Notes to editors

Research by Moneyextra.com showing difference between lenders’ SVR and AER. Ranked by Difference.

Data provided by Moneyextra.com. Correct as of 3^rd June 2009. based on an Instant Access Saving Account - no withdrawal penalties or fixed period bonus.

• For regional data breakdown please call Kitty Parry below.
• Research was conducted on behalf of Moneyextra.com by Ciao Research Ltd between 11-14^th May 2009. Analysis source: Moneyextra.com’s exclusive mortgage data.
• Compared to Q2 2008. Average monthly repayment on interest only mortgage based on average property price is £510.95 – average income earned by banks above base rate is 4.66 per cent or £23.36 per mortgage – representing a 145 per cent or £14.10 increase compared to this time last year.  Number of people coming off their fixed mortgage this year is estimated to be 1.5 million according to the Council of Mortgage Lenders CML. 1.5million X 14.10 = 21.1 million
• Average current SVR is 4.69 per cent or 4.19 per cent above current base rate 0.5 per cent. Average SVR this time last year Q2 2008 was 6.9 per cent or 1.9 per cent above base rate 5 per cent. Income generated above base rate has increased 2.76 per cent or 145 per cent since this time last year.
• N.B. LIBOR is 1.27 per cent; the average SVR is 5.16 per cent which is 3.89 per cent above LIBOR

Contact us

To arrange an interview with Richard Mason please call:

Kitty Parry, Templars PR - 07736 318 413 - Kitty@templarspr.com

Jennifer Rose, Moneyextra.com - 07523 582 661 - Jennifer.rose@moneyextra.com

2009-06-09 17:00:07 © Moneyextra.com

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