How much would my potential mortgage be worth to my bank?

The_Fear

This question has been bugging me today as I'm about to up sticks to another bank after 20 years and I wondered (and googled unsuccessfully); how much could they potentially lose? I don't have a mortgage yet but I'm intending to get one within the next few years.

I already know how much they'll lose on interest in my overdraft, but how on earth do you go about calculating the profit a bank would make from your mortgage over a 25 year period?

If you have some general knowledge in this area and would like to hazard a guess at a ball-park figure then please be my guest...

Let's assume I'm going to take out a standard interest rate repayment mortgage from NatWest with a 25 year repayment plan (on a fixed term initially).

I appreciate things may change as interest rates change, but as I said, just a ballpark hazarded guess will satisfy my curiosity.

Thanks

antrobus

I'd guess they'd look to make a margin of something like 1% or 2% on the actual mortgage. They might also hope to make a few quid on cross-selling some linked insurance products.

Trollfever

If your mortgage was povided by Metro Bank then you would be assured of a personalised service.

The bank's mortgage business is very small. It has just over 100 home loan customers and works only in the safer end of the market, avoiding sub-prime and buy to let mortgages. Its products are also thought to be relatively expensive, which is partly the result of Metro's heavy investment in new branches, which each cost between £1.7m and £2.1m to launch. Their long opening hours also make them more expensive to run.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9146913/Metro-Bank-seeks-150m-for-expansion.html

opinions4u

Many lenders are losing money on their mortgage books at present.

A well conducted low risk mortgage will have a typical margin of 2%, but this will vary from lender to lender.

I'd expect the SVRs of 2.5% that Lloyds TSB and Nationwide customers pay to be around the break even mark.

Those banks heavily reliant on wholesale funding may actually be in a better position if you do take your mortgage elsewhere. They've spent the last 3 years trying to reduce their loan books.

Joe_Bloggs

@The Fear
There are advantageous savings reasons to have numerous current accounts as the current account is often a prerequisite for certain types of savings account and mortgage. My oldest current account has been held over 20 years. Its age is a frequently asked question on credit forms.

I doubt that the exact age can traced back where and when it was opened/ transferred from.
J_B.

Thrugelmir

The_Fear wrote: »

I already know how much they'll lose on interest in my overdraft, but how on earth do you go about calculating the profit a bank would make from your mortgage over a 25 year period?

Few people stick with same lender.

All the set-up cost is front loaded to the lender. This is why once LTV falls under 60%. Interest rates tend not to improve. As profitability diminishes.

The_J

Why would you get a mortgage with your bank? You can get a mortgage from any bank. Limiting yourself to just one option could cost you thousands of pounds over the years.

The_Fear

opinions4u wrote: »

Many lenders are losing money on their mortgage books at present.

A well conducted low risk mortgage will have a typical margin of 2%, but this will vary from lender to lender.

I'd expect the SVRs of 2.5% that Lloyds TSB and Nationwide customers pay to be around the break even mark.

Those banks heavily reliant on wholesale funding may actually be in a better position if you do take your mortgage elsewhere. They've spent the last 3 years trying to reduce their loan books.

Interesting. Can you tell me any more about why this is the case?

The_Fear

The_J wrote: »

Why would you get a mortgage with your bank? You can get a mortgage from any bank. Limiting yourself to just one option could cost you thousands of pounds over the years.

I know that and you know that, but if I'm going to threaten to move banks (I'm 90% done anyway), *they* don't need to know that.

Thrugelmir

The_Fear wrote: »

I know that and you know that, but if I'm going to threaten to move banks (I'm 90% done anyway), *they* don't need to know that.

.....and the lender won't care. Bankers market.

The_Fear

Thrugelmir wrote: »

.....and the lender won't care. Bankers market.

Good to know. It's probably not worth mentioning.