Banks Cash In From Credit Crunch

A recent study has revealed that most mortgage rates are higher now than a year ago, despite lower bank rates and lower money market rates. It looks as though some banks have cashed in during the credit crunch, but some fixed rates are lower than a year ago.

The year of the credit crunch has been a tough time for everyone, but some of the biggest mortgage lenders in Britain have eased their own pain by increasing the amount of money they have been making from home loans.

A study by Money Mail revealed that in some cases an average mortgage has been put up by around £140 per month, despite money market rates having come down.

The best deals available from the biggest mortgage companies from 12 months ago were compared with those on the market today. That period has seen the Bank of England base rate fall from 5.75% to 5%, and money market rates – that is where lenders buy money to source mortgages – have also fallen. The three-month Libor has gone down from 6.35% to 5.76%; two-year swaps have gone down from 6.22% to 5.74%.

These reduced rates could have been passed on to homebuyers to give them cheaper fixed and tracker rate mortgages. However, this has not happened. A year ago Nationwide Building Society had a tracker at 0.37% below base rate; now its tracker rate stands at 0.68% above base rate.

Barclays comes out even worse. Twelve months ago it had a tracker rate at 0.16% below base rate, but now its tracker is at 1.39% above base rate. That’s an increase of 1.55% which equates to £141 a month on a mortgage of £150,000.

Two-year fixed rates have fared better than trackers, but have still seen rises. The two-year fixed from Alliance & Leicester has gone up from 5.59% to 6.14%, which adds just under £50 a month to a loan of £150,000. The year has seen HSBC’s two-year fixed rate go up from 6.09% to 6.34%, equating to £30 a month on the same loan.

The good news is that Halifax and Nationwide now have fixed rates that are lower than a year ago.