MSE News: Mortgage misery as Halifax and RBS raise standard rates

HAMISH_MCTAVISH

Thrugelmir wrote: »

The profits from selling PPI were used to subsidise mortgage products previously.

Nonsense.

Mortgage lending requires no subsidisation, it's immensely profitable for banks.

Greedy bankers just couldn't get enough of those bonuses though, hence the PPI scandal.

Of course, anyone with two brain cells to rub together can figure out that the banksters should not now be ripping off mortgage customers to regain the lost exorbitant profits and bonuses they made from dishonest schemes like PPI, but that's exactly what bankster apologists like yourself seem to be expecting us to believe.

opinions4u

HAMISH_MCTAVISH wrote: »

I'd be surprised if the "risk" premium is more than a few tenths of a percent.

Well something must make it worth their while to offer savers rates over and above LIBOR.

MarkyMarkD

HAMISH_MCTAVISH wrote: »

Current London Interbank Borrowing Rate is around 1%.

A 3.99% mortgage lending rate represents margins of nearly 300% above funding costs.

The banks are making near record profit margins on mortgage borrowing.

No wonder bankers are paying themselves billions in bonuses.... They're ripping off the public like there's no tomorrow.

LIBOR is pretty much irrelevant.

Most of the money lent out on UK mortgages nowadays is derived from retail savers. The average rate payable on new best buy savings accounts is somewhere between 3% and 5% depending on the term.

And banks can't lend out all the money they take in savings. They have to keep some aside for liquidity purposes, on which they earn very low returns.

And banks have to pay large amounts toward the FSCS which are about to increase significantly because the government wants a better return on the money it has, in turn, lent to the FSCS in respect of Bradford & Bingley's bail-out.

So a 3.99% lending rate is not profitable at all, on the basis of comparing marginal income against marginal cost of funds PLUS liquidity costs PLUS FSCS costs.

Not to even mention administrative expenses and profit.

MarkyMarkD

opinions4u wrote: »

Well something must make it worth their while to offer savers rates over and above LIBOR.

That something is both the real cost of inter-bank borrowing (which obviously isn't just LIBOR, however high quality the bank - and just because Lloyds and RBS are partially state-owned doesn't make lending to them state-guaranteed) and the fact that there are limits on what proportion of banks' borrowing they can obtain from the other banks. A lot of it HAS to come from retail savers.

As banks have been forced away from wholesale to retail funding, the supply/demand dynamic has pushed up the average cost of retail funds (savings) significantly compared to LIBOR and base rate.

MarkyMarkD

HAMISH_MCTAVISH wrote: »

Nonsense.

Mortgage lending requires no subsidisation, it's immensely profitable for banks.

Greedy bankers just couldn't get enough of those bonuses though, hence the PPI scandal.

Of course, anyone with two brain cells to rub together can figure out that the banksters should not now be ripping off mortgage customers to regain the lost exorbitant profits and bonuses they made from dishonest schemes like PPI, but that's exactly what bankster apologists like yourself seem to be expecting us to believe.

What childish, jealous, nonsense.

Bankers are paid bonuses, if at all, to motivate them to make more money for their shareholders. Just like employees in any other industry who are paid performance-related bonuses.

To say that they are "greedy" for coming up with additional sources of profit for their employer's shareholders is ridiculous.

Thrugelmir

Selden wrote: »

If this was genuinely performance-related, those bankers would now be facing the consequences of their actions.

Senior management at the banks has undergone a thorough cleanse.

Those responsible have made their money and left.

MarkyMarkD

Selden wrote: »

Up to a point Lord Copper.

If this was genuinely performance-related, those bankers would now be facing the consequences of their actions. They are not. Instead the taxpayer is picking up the bill, whilst for bankers it is business as usual. Private profits, public losses.

That is, I suspect, what for most people sticks in the craw.

The whole concept that the financial crisis was caused by the same people who are now working in UK retail banking is complete nonsense.

The financial crisis was largely rooted in the US and extremely poor lending practices (no income, no jobs mortgages) there. The UK market was, relatively speaking, far more sensible.

What I, and Thrugelmir, want is for the partially state-owned banks to operate in a profitable way, to generate an adequate return on the investors (who are primarily now the UK government) have made.

The taxpayer isn't "picking up the bill". Taxpayers have purchased SHARES in the banks, not given them a GIFT. Success for the banks translates to increased value for the shares, and the ability for the government to eventually sell out at a profit.

Consumerist

We could argue interminably about the cause of these mortgage-rate changes but the upshot is that other lenders must be contemplating similar moves and over the next few years, as fixed rates come to an end, there will be a few chickens coming home to roost.

The big question in my mind is whether this is likely to be the trigger for a slow collapse in house prices. The fallout would be horrendous for home-owners tipping into negative equity coupled with a shortage of mortgage lending.

Is it now time to read the writing on the wall? :eek:.

Thrugelmir

Selden wrote: »

What you want is a return to business as usual. And I think some people would say there is a strong case for a more fundamental rethink.

Back to a day when bank managers not sales people ran some of our major banks. Then the answer is yes. In reality not so long ago. As the credit boom was unleased from 2003 onwards. Barely lasted 5 years.

BASEL 3 regulations come into force in 2018 which do impact how banks operate. So there is fundamental change on its way. What people are currently taking a disliking to is their perceived entitlement to borrow cheaply.

brightbuy

To take the complexity out of the debate for a moment - For those that want some basic information on their banks variable rates linked to the bank webpages this is a useful blog post that compares variable rates.