Mortgage lenders ‘reluctant to reduce rates’

Mortgage lenders are continually increasing market margins in order to stabilise themselves, at the expense of those looking for loans, an industry expert has said.

According to Michelle Slade from Moneyfacts.co.uk, rules that previously applied to lenders such as passing or decreasing rates based on funding costs no longer seem to apply as the widest margin ever between the average two-year fixed mortgage and the two-year swap rate has been recorded, at 3.14 per cent.

“Those looking for a new deal are subsidising the revenue lenders are losing from existing customers on low rate [standard variable rates] or tracker deals,” she said.

Ms Slade added that lenders have in the past been quick to pass on increases but this seems to have declined in the current economic climate.

Recent figures from the Council of Mortgage Lenders revealed that house purchase loans were up by 23 per cent and remortgage loans had risen by 13 per cent to 34,000.

By Sarah Adie