Ah, Already

Re the earlier point about screams of profiteering:

Britain\’s largest mortgage lenders were last night accused of fattening their profits at the expense of increasingly stretched homeowners as two leading firms ignored the third interest rate cut from the Bank of England in five months and pushed through price increases on some of their most popular home loan offers.

Didn\’t take long.

No note of the fact that wholesale inter-bank rates haven\’t moved in lock step with base rate cuts and that it\’s the former which determine the costs of mortgages.

Well done The Guardian, informative and comprehensive as ever.

5 thoughts on “Ah, Already”

  1. “Well done The Guardian, informative and comprehensive as ever.”

    I think a court is going to rule on that in due course.

  2. From your earlier post, you said:

    “but the influence [of the bank base rate on the loan rate] lessens the longer term the loan: and mortgages are, almost by definition, the longest (or almost the longest) term loans in the market”

    Yet when I look at a chart of mortgage rates since 1985 they seem to move much more in line with the base rate than any long-term interest rate.

  3. Why should a reduction in the BoE base rate make any difference at all? It is the rate of interest which BoE pays to the commercial banks for the deposits that they (have to?) hold with BoE.

    So banks will lend elsewhere (i.e. mortgages) if they can get a higher return. Which they can.

    By reverse logic, if BoE puts base rate up, then this will increase mortgage interest rates (which are base rate plys risk premium).

    The rate of interest which BoE charges commercial banks on loans to them (to prop them up) is a different topic. BoE should be charging as much as it can get away with. In other words, mortgage rates minus a risk premium.

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