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More Good News on Borrowing - Aug 08

A Money Mail investigation has revealed how Britain’s biggest mortgage lenders have used the credit crunch as a way to increase the amount of money they make from your home loan.

In some cases up to £140.00 a month has been added to the cost of the average mortgage, despite rates on the money markets having fallen.

Compare the best deals from the nations largest mortgage companies 12 months ago with what is available today.

In this time, the Bank of England base rate has fallen from 5.75pc to 5pc. Significantly, rates on the money markets, where banks buy some of their funds to lend as mortgages, have also fallen.

The price of three month Libor has dropped from 6.22pc to 5.76pc, and two year Swaps have dropped from 6.22pc to 5.74pc. If these falls had been passed on to homebuyers, it would mean cheaper fixed and tracker rate mortgages.

However, over the same time, the cheapest mortgage deals have now rised. Nationwide BS which had one of the best trackers 12 months ago and 0.37 percentage points below the base rate, now charges 0.68 points above.

The biggest increase has come from Barclays, which had a rate 0.16 points below base rate 12 months ago and now charges 1.39 points above – an increase of 1.55 points, or £141 a month on a £150,000 mortgage.

For two-year fixed rates the rises have been less steep.

Alliance & Leicester has raised its rate from 5.59pc to 6.14pc – adding £49 a month to £150,000 loan.

HSBC’s two-year fixed rates have risen from 6.09pc to 6.34pc, and increase of £30.

Yet Halifax and Nationwide have cheaper fixed rates than this time last year.