Halifax Uncompetitive

John424

Hi,

Why are Halifax remortgage rates so totally uncompetitive? They have not been in the best buy tables for years. Also, they put up their SVR to 4.00% recently citing higher wholesale funding costs but are not reducing it back down in light of a) funding costs coming down b) Govt initiative soon to give banks more cheap funds so they can lend more and c) The base rate probably going down to 0.25% soon as reported. As the biggest lender probably they should not be allowed to get away with such daylight robbery to people who are most likely still mortgage 'prisoners'.

John

hcb42

I have always found them relatively competitive.

ACG

standard rate of 4% isnt actually that bad.
There is nothing to say you have to stick with them, if you want a better rate move elsewhere.

opinions4u

John424 wrote: »

Why are Halifax remortgage rates so totally uncompetitive?

For every £1 of customer deposits Lloyds Banking Group, who own Halifax, have £1.26 lent out.

The gap of 26p is plugged by wholesale funding. They don't wish to be reliant on wholesale funding in future as the Credit Crunch, where such funding dried up, effectively screwed the banks and the economy.

So they want more deposits and fewer loans. Subtly encouraging you to take your mortgage elsewhere allows them to reduce their funding gap. If you are unable to move elsewhere higher rates reflect your higher risk.

They have not been in the best buy tables for years.

Well the old HBOS had a massive reliance on wholesale funding at it screwed them. So being regular appeasers in old best buy tables didn't do them much good.

Also, they put up their SVR to 4.00% recently citing higher wholesale funding costs but are not reducing it back down in light of a) funding costs coming down b) Govt initiative soon to give banks more cheap funds so they can lend more and

but wholesale funds raised three months ago aren't coming down. Higher rates paid to savers on fixed rates aren't coming down.

c) The base rate probably going down to 0.25% soon as reported.

Oddly, this will make banks less profitable so if it happens I'd expect to see margins widen between savings and mortgage rates.

As the biggest lender probably they should not be allowed to get away with such daylight robbery to people who are most likely still mortgage 'prisoners'.

Tell you what, let's turn the clock back four years to when all was rosy.

How about an SVR of 7.5%?

Southend1

opinions4u wrote: »

For every £1 of customer deposits Lloyds Banking Group, who own Halifax, have £1.26 lent out

Is this correct? I would have thought given we have a fractional reserve banking system it would be more like £10 lent out for every £1 of deposits? Surely the funding gap requiring wholesale funds is really the gap between actual lending and the maximum permitted under banking rules?

opinions4u

Southend1 wrote: »

Is this correct? I would have thought given we have a fractional reserve banking system it would be more like £10 lent out for every £1 of deposits? Surely the funding gap requiring wholesale funds is really the gap between actual lending and the maximum permitted under banking rules?

I think that shows that the term "fractional reserve banking" has been thrown about by conspiracy theorists as some sort mystical way of instantly multiplying money when it is anything but.

Page 4 of the link below confirms deposits and loans.

http://www.lloydsbankinggroup.com/media/pdfs/investors/2012/2012_LBG_HalfYear_Results.pdf

Southend1

Interesting to look at the figures but I can't pretend I fully understand. It looks to me like they are hoarding cash and paying for the privilege?

opinions4u

Southend1 wrote: »

Interesting to look at the figures but I can't pretend I fully understand. It looks to me like they are hoarding cash and paying for the privilege?

Thy have to retain a certain amount of capital to cover against bad debt and to comply with regulatory requirements.

Some would call it hoarding. Others would call it a requirement.

Southend1

opinions4u wrote: »

Thy have to retain a certain amount of capital to cover against bad debt and to comply with regulatory requirements.

Some would call it hoarding. Others would call it a requirement.

I can see why they would need to have provision for bad debt but I always thought a bank would lend a lot more than they hold in deposits to increase the ability to earn profit. Seems from Lloyds' figures that I may have misunderstood this point.

opinions4u

Southend1 wrote: »

I can see why they would need to have provision for bad debt but I always thought a bank would lend a lot more than they hold in deposits to increase the ability to earn profit. Seems from Lloyds' figures that I may have misunderstood this point.

If their loan book exceeds the size of their deposits from retail customers and wholesale funders they are basically insolvent.

Icelandic banks. Northern Rock. Bradford and Bingley. HBOS. All had this problem in 2008.

Southend1

opinions4u wrote: »

If their loan book exceeds the size of their deposits from retail customers and wholesale funders they are basically insolvent.

Icelandic banks. Northern Rock. Bradford and Bingley. HBOS. All had this problem in 2008.

I had thought that most banks were insolvent most of the time and that they got away with it because they know roughly how much demand there is from people wanting to withdraw their deposits... Until demand for withdrawals becomes unusually high. I think I must have been mistaking this for the fact that even if deposits are matched pound for pound by loans it can still cause a bank to go bust because most deposits are repayable on demand whereas most loans are not.