Why are mortgage rates so high?

xpi0t0s

Current base rate: 0.5%. My mortgage: 4%. Best I can do at MoneySupermarket: 3.5%. This is eight and seven times the current base rate respectively, or base rate+3/3.5%. Used to be you could get mortgages at base+0.5%.

So my current mortgage costs me £550/month at 4%, but the bank only has to pay 1 eighth of that, i.e. £70/month.

What happened to the free market? Why aren't there any banks out there doing mortgages for base+1% or less? They'd be swamped for one thing.

mrginge

What makes you think that banks are borrowing at base rate?

It doesn't work like that I'm afraid.

somethingcorporate

Plus they want to make a profit too - you'd be a fool to set your price based on cost alone, you need to look outward to what the competition is priced at.

gunsandbanjos

Also last time I checked banks are businesses!

Thrugelmir

What happened to the free market?

Easy access ISA 1.6% advertised on this very site.

There's no magic money tree. As many believe. The money you borrow is somebody elses savings.

http://www.moneysavingexpert.com/savings/cash-isa-transfers

antrobus

xpi0t0s wrote: »

....What happened to the free market? Why aren't there any banks out there doing mortgages for base+1% or less? ....

There are.

There are a number of lenders offering mortgages in the ballpark of 1.5%-2.0%. Roughly 2 year fixed deals though, and maximum LTVs of 60%.

dunstonh

What happened to the free market? Why aren't there any banks out there doing mortgages for base+1% or less? They'd be swamped for one thing.

How long do you think a bank would survive lending people money at 1% whilst paying savers or investors (via the money markets) 3%?

Money lent has to be funded. Funded by savers/investors. The base rate is just the bit before everyone adds their margins onto it.

edinburgher

We're currently remortgaging, 3.15% and we only had a 15% deposit when we started out 2 years ago.

I don't think mortgage rates are particularly high, I can beat this rate with savings! :beer:

cattie

Mortgage rates high??? I well remember the days when mortgage rates hit 13% & repossessions & negative equity were common.

I worked hard to clear my mortgage early over the years & the rate was around 6+% when I last had a mortgage, so to me the rates on offer these days appear super duper low. Almost freebies!:rotfl:

Prothet_of_Doom

In 1991 (I think it was) I came home to find my wife crying. The mortgage rate we were paying was now 15.5%.

I keep asking "why are mortgage rates so low?"

dunstonh

Mortgage rates high??? I well remember the days when mortgage rates hit 13% & repossessions & negative equity were common.

There is going to be a generation of people that think this is the norm. They are in for a shock when rates return closer to the long term average of 7%.