Banks could make billions from increasing profit margins
November 28, 2008 by admin
Filed under News, News-Loans
According to a recent report many of the UK’s major banks could end up making billions of pounds in extra profits by increasing the margins on loans and mortgages. It is thought that the banks could end up making around £3.6 billion as a result of these increases, so although the Bank of England base rate has fallen from 5.75% to just 3% over the past year the banks are still set to make huge profits.
Recently released figures have shown that around £1.5 billion will be made on mortgages alone by the banking industry, and this is because the drop in mortgage and loan interest rates is not falling in line with the drop in the Libor, which is the rate at which banks and financial institutions lend to one another.
The swap rate is falling more significantly than the interest rate for consumers, and this means that the profit margin on loans, mortgages, and even credit cards and overdrafts, is far larger for banks.
One industry official said: “Just as consumers are feeling the pinch, so too are banks, but unlike the average person who has to somehow trim costs from their everyday budget, banks can – and clearly have – been sneakily upping interest rates by 0.25 per cent here, 0.5 per cent there, in order to claw back some of their lost revenues. Whereas people can perhaps save £20 or £30 a week by being savvy spenders, our figures show banks creaming £3.9 billion more than we would hope and expect from their loyal customers who are saddled with a mortgage, credit card debt or loan.”
Another said: “The cost of credit is steadily increasing, and we are concerned that banks are using the current crisis to squeeze more money out of people who are already struggling. Consumers will be fuming if banks who have been bailed out with taxpayer money are increasing charges and arrangement fees, yet falling over themselves to cuts savings rates. An independent review of banking is urgently needed to ensure that consumers are offered a fairer deal and have access to value for money products.”
