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Banks Profiteering On Mortgages With Record Gap Between Borrowing And Lending Rate

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http://www.telegraph.co.uk/finance/persona...nding-rate.html

The difference between the interest rate that banks charge and the rate at which they borrow is the biggest since the Bank of England started collecting data 15 years ago.

The figures demonstrate that, two years after the credit crunch began, consumers are being hit harder than ever, despite the Bank cutting interest rates to an all-time low of 0.5 per cent.

Last night senior politicians and campaigners called on banks, many of which have been propped up with billions of pounds of taxpayers’ money, to “play their part†by lowering borrowing costs.

Today Mervyn King, the Governor of the Bank, is to unveil his latest quarterly predictions for the economy. He is widely expected to say that lenders are failing to pass on billions of pounds of government support to consumers and small businesses.

The Bank’s statistics show that the average two-year fixed rate for new mortgage customers climbed to 4.46 per cent during July, with the average five-year fixed deal hitting 5.7 per cent.

According to analysis by Michael Saunders, the chief UK economist at Citigroup, the difference between these rates and the rate banks charge each other is at a record margin. Banks are making a full 2 percentage points of profit on fixed rate mortgages – the first time this has happened, the Bank’s data indicated. Two years ago, lenders made 0.1 percentage points profit on a five-year deal.

The record profit on fixed-rate mortgages is hitting an increasing number of home owners and home buyers.

Lenders have been sending out letters to home owners inviting them to take out a new fixed deal when their current loan comes to an end.

Separate figures released yesterday by the Council of Mortgage Lenders showed that four out of five mortgage deals agreed in June were fixed rate. At the start of this year, less than half of all mortgages were fixed rate.

The Bank’s figures also indicate that overdraft rates are at an all-time high of 18.97 per cent. Five years ago, they were below 15 per cent.

A five-year £5,000 unsecured loan – a common form of borrowing for many families struggling to cope with paying their bills in the recession or to fund a major purchase – now carries an average interest rate of 13.09 per cent. Two years ago, it was below 9 per cent. Savings rates are at an all-time low with the average cash Individual Savings Account at 0.41 per cent – a tenth of the level of a year ago, with standard savings accounts at 0.15 per cent.

Philip Hammond, the shadow chief secretary to the Treasury, said: “The credit crunch remains a reality for hard-pressed home owners. The Government has pumped billions into the banking system, yet home owners and would-be home buyers are still struggling to get mortgages they can afford. It’s time we had less grandstanding and more action to get affordable credit flowing again.â€

Why is the credit crunch a problem for hard pressed home owners???? Are any home owers on here in trouble, anyone got large unsecured debts?

I suspect some mortgages borrowers maybe in trouble, but then they are not home owners.

Poor journalism with this? The base rate does not reflect funding costs which appears to have been omitted from this piece?

Also no mention of risk.

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