Mark Up On Fixed-rate Mortgages Hits New High

[interestrateripoff]

http://www.telegraph.co.uk/finance/persona...rd-margins.html

The interest rate charged on the average two-year fixed-rate home loan is 5.18pc, according to moneyfacts.co.uk, the financial data provider, while the two-year "swap" rate – the price lenders pay for fixed-rate funds on the wholesale markets – is 2.04pc. This makes the margin 3.14 percentage points, the widest on record, the company said.

Lenders that fund fixed-rate mortgages via customers' savings are also making record margins, the research found, with the average rate paid to savers tying up their money for fixed terms standing at 3.42pc.

Only a few lenders, including Cheltenham & Gloucester and Nationwide Building Society, had reduced some of their rates on these loans over the last month, while others such as Barnsley and Chelsea building societies and the Post Office had increased rates.

Michelle Slade of moneyfacts said: "Borrowers looking for a new mortgage deal are continuing to pay a heavy price for previous mistakes made by lenders. Margins continue to be increased as lenders look to repair dented balance sheets.

"Normal rules where lenders pass or decrease rates based on the cost of funding seem to have well and truly gone out of the window."

She added: "Lenders have always been quicker to pass on increases rather than decreases, but many seem to be reluctant to pass on any decrease in the current climate. Fixed rates are the preferred option for many borrowers, and lenders are cashing in on those seeking a new deal."

Suckering people in to take on variable rate mortgages? If the BoE does escalate fast it could be carnage, unless of course we are in a full swing recovery and everyone can afford it.

[porca misèria]

http://www.telegraph.co.uk/finance/persona...rd-margins.html

Suckering people in to take on variable rate mortgages? If the BoE does escalate fast it could be carnage, unless of course we are in a full swing recovery and everyone can afford it.

Same thing applies to savings.

e.g. Nationwide: yields up to 9.25% gross (NABB), and the lowest-yielding fixed rate is 7.91% (POBA), whereas the variable rate CEBB yields just 4.73%.

Guess which is expected to rise?

[Injin]

http://www.timesonline.co.uk/tol/money/pro...icle6809582.ece

Britain’s banks and building societies are refusing to cut the cost of fixed-rate mortgages despite huge falls in the cost of funding such deals.

The cost of the best two-year fixed rate deal rose from 3.97 per cent to 4.07 per cent in the past month, research from financial data firm Moneyfacts shows, while the cost of funds on wholesale markets has fallen.

The cost of the average two-year fix at 5.18 per cent stands at a record high compared to the wholesale cost of funding such deals – known as two-year swap rates - at 2.04 per cent. The difference, at 3.14 per cent, represents the widest spread on record, Moneyfacts said.

The mortgage industry has argued that swap rates do not accurately reflect the lenders' costs as some cannot access wholesale rates, usually smaller building societies that instead rely on savers’ deposits to fund lending.

It is widely accepted, however, that most mainstream high street lenders are able to borrow on wholesale markets at quoted swap rates, or for a “tiny†premium.

Michelle Slade, of Moneyfacts, said all lenders are quick to pass on increases in the cost of funding, when they occur.

Slade said: “Margins continue to be increased as lenders look to repair dented balance sheet and borrowers looking for a new mortgage deal are continuing to pay a heavy price for previous mistakes made by lenders.â€

Lloyds-owned Cheltenham & Gloucester (G&G) and Nationwide building society have bucked the trend and cut interest rates, however, their deals remain considerably higher than the best-buys.

Chelsea building society and The Post Office - previously offering market-leading deals – were forced to increase rates last week to stem the flow of business.

The market-leading fixed rate deal is currently First Direct’s two-year fix at 3.94 per cent with a £998 fee for a borrower with a 25 per cent deposit. The best five-year deal is from the Co-op at 4.99 per cent with a £995 fee for a borrower with a 25 per cent deposit.

By comparison, C&G charges 4.39 per cent with a £995 fee for a two-year fix for a borrower with a 25 per cent deposit.

Slade said: “Fixed rates are the preferred option for many borrowers', and lenders are cashing in on those seeking a new deal

“Normal rules where lenders decrease rates based on the cost of funding seem to have well and truly gone out of the window.â€

No shit.

[VeryMeanReversion]

Article also includes:

"Experts warned that if action is not taken, mortgage rates would reach 10 per cent within a year once Bank of England interest rates begin to rise."

Alarmist and untrue but interesting.

VMR.

[fluffy666]

http://www.timesonline.co.uk/tol/money/pro...icle6809582.ece

No shit.

I've noticed 5-year fixes hitting up to 6%. Not fun.

[interestrateripoff]

Alarmist and untrue but interesting.

VMR.

Do journalists ever write in a non alarmist and true fashion.

Alarmist and untrue sells.

[kilroy]

Maybe the risk premium is high because the risk is high?

[symo]

Suckering people in to take on variable rate mortgages? If the BoE does escalate fast it shall be carnage, unless of course we are in a full swing recovery and everyone can afford it.

[interestrateripoff]

Maybe the risk premium is high because the risk is high?

Circular, higher rates ensure more defaults ensuring higher rates to negate the risk of higher defaults.

[Bloo Loo]

well, someone has to pay for the BoE base rate -% stupidity, better borrowers willing to prop up stupid prices than those not bothering.

and even those tryng to get those low low SVR rates are having to put down large deposits and fees.

banksters.....none are going to heaven.