Thursday, Sep 18, 2008
It's all good!
Telegraph: HBOS - Lloyds TSB merger likely to push up mortgage rates
Mortgage rates are likely to rise if Lloyds TSB takes over HBOS, according to personal finance experts.
The merger will create Britain's biggest mortgage company, supplying more than one in four mortgages in Britain.
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Mortgage experts said the creation of such a big player would be bad for competition in the market, causing rates to increase.
Posted by tyrellcorporation @ 09:33 AM (478 views) Add Comment
5 Comments
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1. cornishman said...
I can't understand the argument that a merged LloydsHBOS will push up mortgage rates.
If a big supermarket comes to town, it doesn't put the smaller shopkeepers out of business by charging more than the small local shops - it undercuts them. Until such time a the merged LloydsHBOS has all the market to itself (if ever), it will have to be competitive with its smaller, leaner competitors.
Or have I missed something?
Having said that, there will likely be a reduction in lending to uncreditworthy individuals. But that is a good thing, surely?
2. harold said...
HBOS, the UK's biggest mortgage provider, were/are effectively broke, as in "bankrupt". Lloyds TSB is feeding on their entrails. Of course, for the masses this is being spun as a merger, but if it were a merger HBOS shares would not have imploded yesterday.
cornishman, mortgage rates were going to go up anyway, irrespective of this "merger". Red herring talk.
3. mark wadsworth said...
Cornishman, well said!
Yes, banks like higher interest rates. But higher interest rates push down house prices and reduce economic activity, so banks also stand to lose if they push them too high. Ergo, there's no need for an MPC official interest rate anyway (but that's another story).
Getting back to the topic, if they do put up rates, so what? Higher interest rates only affect existing borrowers and not tenants who intend to buy - the higher rates are offset by lower house prices.
4. jonb said...
Higher interest rates make it easier for us tenants to save up for a deposit.
5. Peeps said...
Less competition in the financial markets will mean not only higher mortgage rates but *lower* savings rates. Just because mortgage rates go up what incentive does such a large institution have to raise savings rates as well?