Banks profiteering on fixed-rate mortgages

Millions of homeowners are paying hundreds of extra pounds on their mortgages as bank mark-ups on home loans reach record highs. An alarming report published today claims the profit margins enjoyed by the banks on fixed rate deals are the highest since 1988.

The rip-off means the average homeowner with a £150,000 loan is paying nearly £150 extra every month. Last night experts accused banks of 'lining their pockets as quickly as they can' at the expense of cash-strapped homeowners. The startling figures released by financial information firm Moneyfacts - emerged just days after Britain 's five biggest banks revealed total profits of £15bn for the first half of this year.

The financial giants have also come under fire for failing to fulfil pledges to increase lending to small businesses who are desperately in need of finance to aid economic recovery.

But the latest scandal centres on the most popular home loan in Britain : the fixed-rate mortgage.

In June, nearly 50% of people who took out a mortgage opted for a fixed-rate deal, attracted by the certainty of unchanging monthly payments.

But the research from Moneyfacts reveals how the profit margin enjoyed by Britain 's mortgage giants has ballooned to a 22-year high since its records began in 1988.

The 'margin' is the difference between the interest rate that homeowners are charged, and the cost to the bank of borrowing the money, known as the 'swap rate'.

For example, the average two year fixed rate is 4.55%. The swap rate is 1.26%, which means the margin is 3.29%, a record high.

However, in June 2007, the average interest rate on a two-year fixed rate deal was 6.26%. The swap rate was 6.16%, meaning the margin was just 0.1%.

Michelle Slade, of Moneyfacts, said: 'Borrowers will be angered that they continue to pay the price for mistakes made by lenders, particularly those who have accepted government funding.'

Two of the country's biggest mortgage lenders - Lloyds Banking Group and Royal Bank of Scotland - are part-owned by taxpayers.

Two years ago, the margin was just 1.28%, which means it has nearly trebled to an average of 3.29% today. For a £150,000 loan this means an extra £150 a month. Over the two-year life of a typical fixed-rate mortgage, this adds up to an extra £3,576 - more than two months' pay for the average worker.

Eddy Weatherill, from the Independent Banking Advisory Service, said: 'Banks are basically lining their pockets as quickly as they can.' For homeowners, their treatment by the banks and building societies comes at a time when many can least afford it. - Daily Mail 20/08/2010

Lloyds bank boss Eric Daniels will retire with £6m pay-off

Lloyds chief Eric Daniels faced outrage yesterday after it emerged he will retire with an estimated £6million pay-off. The 59-year-old American, who oversaw the bungled takeover of HBoS during the credit crunch, will stand down when a suitable replacement is found. He was criticised for pushing through the deal which eventually forced the bank into a taxpayer bail-out and 18,000 job losses.

Daniels joins a growing list of financial bosses who were at the helm when the financial crisis struck in 2007 in departing with a pay-and-perks bonanza. After another year on his £1.04million salary, Mr Daniels will walk away with a £4million pension pot worth £192,000 a year and a bonus of more than £2million.

Independent Banking Advisory Group chairman Eddy Weatherill fumed yesterday: "These guys are getting out while they can while the rest of us pay the price. They can see the writing on the wall with regulators coming down hard and the threat of banks being split-up. "Daniels and his like are made for life at our expense." - Daily Mirror 21/09/2010

More current banking accounts charge fees

The number of current accounts which charge a fee has nearly doubled in five years, research reveals today. It fuels fears that the era of free banking is rapidly disappearing, with customers forced to pay up to £25 a month for a current account. More than 40 per cent of current accounts now levy a fee. Of the 104 current accounts on offer, a record 44 charge a fee, compared with just 24 five years ago.

The research, from the financial information firm Moneyfacts, includes all standard current accounts, but excludes student or graduate accounts and 'basic' current accounts which do not permit overdrafts and other standard services. The fee-charging accounts, also known as 'packaged' accounts, lure customers with perks such as travel or mobile phone insurance, car breakdown cover and card fraud protection.

But many of the perks may be pointless, such as breakdown cover for customers who do not own a car, or over-priced, such as travel insurance which is cheaper if bought separately. Up to 6million people have some type of 'packaged' account, with average fees of around £12 a month.

This week the Financial Services Authority raised its fears about this type of account, saying many people would be 'better off' without one. Eddy Weatherill of the Independent Banking Advisory Service said: 'Packaged accounts are great for the banks because they bring in a guaranteed amount of money every month. But there is a sleight of hand going on with them. 'They are all bells and whistles. It doesn't cost the banks anything because the value of the so-called perk is nothing.' - 13/03/10 Daily Mail

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