DOOM: Banks

[AtW]

“Banks ‘will charge mortgage borrowers more’ if Hunt demands better savings rates

Lenders react after the Chancellor meets regulators to discuss a support package for households

Banks will be forced to increase mortgage costs for millions of borrowers if Jeremy Hunt orders them to pay higher savings rates, the industry has warned.

Lenders will have no choice but to protect their margins by increasing their mortgage rates if the Chancellor imposes new rules on savings accounts, according to a senior executive at the trade body UK Finance.

It came as Mr Hunt met with regulators to discuss a package of support for squeezed households. He has ordered the Financial Conduct Authority (FCA) to report back in July on whether savers are getting a good deal.

Eric Leenders, managing director of personal finance at UK Finance, said banks are “acutely aware” of the need to pass on interest rates and have worked hard to be fair.

He added: “If we wanted to pay savers more then we’d have to charge mortgage borrowers more.”

The comments come amid widespread criticism of banks for increasing mortgage rates more quickly than returns on easy access accounts.

For example, Santander and Barclays only pay 0.85pc interest on savings but charge 6.03pc and 6.83pc respectively for a two-year fixed-rate mortgage after repeated increases in line with the rising Bank Rate.

Mr Leenders said that banks’ room for manoeuvre is limited because so many customers are on fixed-rate mortgages which were locked in years ago at much lower borrowing costs.

Over 80pc of the mortgage market is propped up on fixed rates, with around half of these borrowers on five-year fixes still yet to expire.

This means that when the Bank Rate increases, the majority of mortgage holders continue to pay their lender the same amount.

Banks argue that because of this imbalance, which is only partially offset by the fact their fixed savings books are much smaller, they cannot pass on the same amount they charge mortgage borrowers.”

https://www.telegraph.co.uk/personal...-hunt-savings/

So, banks make long term fixed commitments, but expected to fund them from short term savers who can move money elsewhere or just spend them?

Effectively 80% is UK mortgage market is based on fugazi, banking chiefs and regulators should go to jail for allowing this to happen

[AtW]

Scam number 2 - “The rate of interest for the late payment of other taxes is calculated as base rate plus 2.5, so will increase to 7% from 31 May 2023. The rate of interest paid by HMRC on the overpayment of tax is calculated as base rate minus one. It will increase to 3.5% on 31 May 2023”

[jamesbrown]

Fine by me. Feel free to hammer mortgage holders even more

[Protagoras]

Since when did savers ever expect to get a good deal from the banks?

If the government was really concerned about interest rates available to savers, then they could arrange for NS&I to offer savings accounts with better rates than the banks.

[jamesbrown]

Since when did savers ever expect to get a good deal from the banks?

If the government was really concerned about interest rates available to savers, then they could arrange for NS&I to offer savings accounts with better rates than the banks.

That’s different because it would lead to a vast outflow of capital from the private to public sector, funded by the taxpayer. That said, they probably shouldn’t meddle beyond supporting competition among banks and making it easier for challenger banks. You can pretty much forget about the high st banking cartel, but there should be decent savings rates elsewhere.

[AtW]

Since when did savers ever expect to get a good deal from the banks?.

Wince before 2008 - it was normal for banks to have savings rates close to BoE rate and mortgages rates were +2%

Real problem now is that banks made long term investments (into fixed mortgages that can become unaffordable and security value can drop a lot) funded by short term money

[woody1]

With most people on fixed rates, interest rates don't work as well, as a lever, for the BoE as they used to a few decades ago.

When interest rates were put up in the late 80s, it had an immediate effect. Now its a slow motion car crash.

[Protagoras]

Wince before 2008 - it was normal for banks to have savings rates close to BoE rate and mortgages rates were +2%

Perhaps the margins to which banks are 'entitled' are higher now?

[dsc]

Eric Leenders, managing director of personal finance at UK Finance, said banks are “acutely aware” of the need to pass on interest rates and have worked hard to be fair.

He added: “If we wanted to pay savers more then we’d have to charge mortgage borrowers more.”

The comments come amid widespread criticism of banks for increasing mortgage rates more quickly than returns on easy access accounts.

For example, Santander and Barclays only pay 0.85pc interest on savings but charge 6.03pc and 6.83pc respectively for a two-year fixed-rate mortgage after repeated increases in line with the rising Bank Rate.

Interest rates are at 5% and they say they worked hard to be fair and offer 0.85%. My ass.

What sort of ponzi scheme is this tulipe? Good luck trying to tame inflation with interest rates if you've rigged the system so much that it no longer works.

[Fraidycat]

With most people on fixed rates, interest rates don't work as well, as a lever, for the BoE as they used to a few decades ago.

When interest rates were put up in the late 80s, it had an immediate effect. Now its a slow motion car crash.

Who knows, in the US they have really long mortgage fixes, 15 years or more. They raised rates and inflation fell back pretty quick.

In the UK it looks like we had a wage and benefits spiral. Pensions and other Benefits and Minimum wage all got 10% increases. Everyone else got around 6% (except us contractors).