First-time buyers punished as UK’s biggest lenders ‘sneakily’ raise mortgage rates
Some lenders have raised tracker mortgage rates by 0.45pc this week
Britain’s biggest lenders are punishing first-time buyers by quietly increasing the cost of their mortgages in a move which defies the Bank of England’s Governor, Mark Carney, who said they have “no excuse” not to pass on recent interest rate cuts.
When the Bank cut interest rates from 0.5pc to a record low 0.25pc in August to make lending cheaper, Mr Carney insisted the effect of lower rates effect should be felt “immediately” in the economy.
But over the past week major lenders including Halifax, Tesco and Nationwide have adjusted the price of a number of popular tracker mortgages upwards, making them more expensive for buyers.
Carney: Banks have ‘no excuse’ not to pass on interest rates cut Play! 00:32
Experts said banks were “sneakily” upping rates to boost their own profit margins, at the expense of consumers.
It means already struggling first-time buyers are now being attacked from all angles, as banks have also slashed rates offered on savings and high-interest current accounts, making it more difficult for them to save for a deposit.
For example hundreds of thousands of savers with money in 3 Santander’s 12account were dealt a blow on Monday when it cut its headline rate in half, from 3pc to 1.5pc.
The biggest price increases were made yesterday by Halifax, Britain’s biggest lender, which increased the interest rate on its 2-year tracker for first-time buyers with a 15 to 20pc deposit, by 0.45 percentage points from 1.59pc to 2.04pc. This adds £86 a month to the cost of a 25-year £400,000 mortgage.
Mark Carney, the Bank of England’s governor, cut interest rates and said lenders had “no excuse” not to pass savings onto borrowers
A Lloyds Banking Group spokesman said Halifax had minimized the impact on customers by increasing cashback by £500. He said: “Base rate is only one of a number of factors we use to take into account when reviewing interest rates.” However, he declined to disclose what these factors were.
Meanwhile on August 11, just one week after Bank rate was cut, Tesco Bank also raised rates applied to its 12 of its tracker mortgages for new customers.
Its two-year tracker with £0 fee for borrowers with 10pc deposits will now receive a rate of 2.83pc, up 0.28pc from 2.55pc, adding £57 a month to a 25-year £400,000 mortgage and cancelling out the benefit of the rate reduction all together.
A Tesco Bank spokesman said; “We have reviewed our mortgage tracker rates in line with market variation, and whilst they have changed, they are still among the lowest rates currently available.”
And after dropping tracker rates by 0.25pc in line with interest rates, Nationwide also added 0.10pc onto a number of tracker mortgage rates. A spokesman said: “The cumulative reduction in those cases remains at 0.15pc lower than before the Bank Rate reduction.”3
Andrew Montlake, a mortgage expert at Coreco, a mortgage broker, said: “Lenders have done this [increased rates] because ultra-low Bank rate directly affects their profitability. It is a sneaky attempt by banks to protect their own margins but this kind of move is not uncommon in a falling market.”
Peter Gettins, product Manager at London and Country Mortgages, said: “The good news is there are still some trackers out there that haven’t been increased yet. Barclays is still offering 0.99pc above Base rate for 2 years on a tracker mortgage, for example. How long that will last is anyone’s guess, but as Lloyds and many others have shown, it doesn’t pay to hang around.”
Rob’s Comments, I grow weary of the Poor this group of people and Poor that group of people. We live in a free market. If First Time Buyer are not happy with the mortgage deal, RE-MORTGAGE at their earliest. You don’t have to give a bank your business you can always leave and if enough of you do that, the banks will soon get the message.