MPs accuse mortgage lenders of profiting by raising interest rates MORE than 0.25%
MPs have accused mortgage lenders of ‘profiting’ from the cost of living crisis as some lenders hike interest rates to double the Bank of England’s 0.25 per cent hike and ask banks to “to explain”.
Major banks have hiked mortgage rates to as much as 0.5%, adding to the misery of already struggling families in the UK.
The Bank of England this week raised the base interest rate from 1% to 1.25% – which should benefit savers but will hurt the finances of renters and mortgage owners.
The rise will affect around 1.9million people who currently have a mortgage – but things are set to get worse as interest rates are set to rise to 3.5% by the end of next year.
Some banks are already raising costs more than the Bank of England – despite the highest interest rate in 13 years.
Major banks have hiked mortgage rates to as much as 0.5%, adding to the misery of already struggling families in the UK. HSBC announced it would hike rates by 0.5 percentage points, double the Bank of England’s hike
Conservative MP for Harlow and the Villages Robert Halfon said banks who ‘raise interest rates above the base rate must explain themselves’
The rise also represents the fastest six-month rise in nearly 35 years after rates were also hiked earlier this year.
Barclays, First Direct, HSBC and Virgin Money were among the first to reveal that their variable rates – or trackers – would increase immediately. Santander increases its rates from July and Nationwide from August.
HSBC raised the prices of its fixed-rate mortgages this week between 0.45 and 0.5 percentage points, although the bank says this was unrelated to the rise in interest rates.
Meanwhile, Nationwide raised prices by up to 0.4 percentage points and Natwest by up to 0.27 points.
The government is increasingly concerned that increasingly expensive mortgages could be the next flashpoint in the cost of living crisis, The temperature reports.
A government source told the newspaper: ‘There are 25million homeowners on mortgages – that’s one of the biggest bills.
“The impact is becoming clear as floating rate agreements come to an end.
“It’s similar to energy price caps in that you don’t see the impact until the deals end – then everyone’s payments go up.”
Conservative MP for Harlow and the Villages, Robert Halfon, added: ‘If some banks raise rates a little bit, the banks that raise interest rates above the base rate have to explain themselves.’
“The government should ask itself if these banks are actually making a profit.
The Bank of England raised interest rates for a fifth consecutive time to a 13-year high of 1.25% this week – with some of the UK’s biggest banks passing the hike on to customers
HSBC customers could see their mortgage rates rise by 0.45 and 0.5 per cent, double what other major banks are raising borrowing prices by
“There will probably be more base rate hikes and what are the banks going to do?” Are they going to raise the rates so much that they are going to repossess people’s homes?
Rising interest rates are just the latest aspect of the cost of living crisis that is putting families under pressure.
Fuel prices have crossed the 190p per liter mark this week, with the average tank in a car costing over £100 to fill.
Inflation also continues to rise, hitting a 40-year high of 9% last month.
Pump prices are at an all-time high and could soon reach over 200 pence a litre. The government has been criticized for not doing enough to help keep prices low after their 5p fuel tax cut was scrapped within days
According to banking trade body UK Finance, around 75% of the 8.96 million mortgage borrowers are on fixed agreements as opposed to variable agreements.
The other 25% see their mortgage payments rise or fall with interest rates.
New analysis from the company, produced earlier this month, says: ‘With consumer confidence dipping to an all-time low, forward-looking surveys and early indicators suggest a much bleaker outlook for the remainder of 2022.
“The impacts of rising energy prices and the war in Ukraine are now beginning to be felt by businesses and consumers alike as soaring inflation puts the UK in the eye of the storm. a storm in the cost of living.
“And with the Bank of England set to make further interest rate hikes, we expect household finances to tighten.”
This adds that for the average household borrowing for a mortgage in 2021, 2022 will see them have 3% less disposable income.
The ‘wiggle room’ in mortgage lenders’ budgets is set to shrink across all income brackets – but Finance UK says the hardest hit will be those on the lowest incomes.
Eric Leenders, the company’s chief executive, said: ‘During the first quarter of 2022 we saw the spread of the Omicron variant of Covid and consumer prices starting to rise, although this did not translate into lower spending or mortgage borrowing.
“However, we know that some people, especially those on low incomes, will already feel the pressure.
“There are significant additional pressures on household finances in the second quarter, particularly due to rising energy prices and tax changes.
“Our analysis shows that this year there will be a 3% drop in disposable income for the average mortgage household, which could lead to more moderate spending and borrowing.”
Someone with a loan of £150,000 on their lender’s average standard variable rate will have to pay an extra £21 a month – or £252 a year, according to mortgage broker L&C.
That’s £96 a month – or £1,152 a year – more than before interest rates started rising by a record 0.1% in December.
Fixed rate offers for new customers are also becoming much more expensive.
The two-year lows of the ten major lenders have tripled on average since October last year, according to L&C.
The cheapest average is 2.71%, down from 0.89% nine months ago.
David Hollingworth, Associate Director of L&C, said: “The pace at which mortgage rates have moved has been astonishing.
“Many lenders continued to make changes week after week, making it difficult for borrowers to keep tabs.
“If fixed rates continue to climb, they could cross the 4% mark before the end of the year.”
But there is good news for customers of Leeds Building Society and Coventry Building Society, who have decided to maintain their Standard Variable Rate (SVR).
Skipton Building Society is set to go further and maintain its SVR and variable mortgage rate – helping mortgage borrowers not feel the pinch as much.
The Bank of England said 191,394 mortgages were approved in the first four months of the year, up 41% from 135,607 mortgages approved in the same period of 2021.
But UK Finance says overall house buying fell sharply in the first quarter of the financial year after an unprecedented boom last year due to the suspension of stamp duties.