Britain's biggest bank has accused its rivals of fleecing homeowners. Is your bank manipulating its mortgage rates to take more money from your pocket?
HSBC
(LSE: HSBA)
, Britain's biggest bank by stock-market value, has accused its rivals of overcharging their mortgage customers.
The bank claims that almost all major lenders have failed to pass on interest-rate cuts - and use hikes in the Bank of England's base rate as an excuse to increase their mortgage rates even further. With most commentators predicting two or three further increases to the base rate during 2004, this profiteering is a real concern.
Since July 2000, the base rate has fallen to 4% from 6%, but the UK's three largest lenders have only reduced their standard variable rates (SVR - the rate paid by all borrowers who don't have a special-rate deal) by 1.74%. This extra 0.26% means huge additional profits for the largest lenders.
HSBC reckons that by manipulating their margins - 'widening the gap' - lenders have earned an extra £1.27 billion between July 2000 and December 2003, which comes to around £1,271 per borrower. As almost half of mortgage borrowers (45%) are paying SVRs, this sneaky tactic has hit millions of customers.
HSBC and Nationwide BS (down 12%) are the only big players to have reduced their mortgage-rate margins since mid-2000. HSBC has reduced its margin by 57%, while its rivals have increased theirs by up to a quarter (24%). The UK's largest lender, Halifax, part of HBOS
(LSE: HBOS)
widened its margin by 15% over 3½ years.
Here's how the ten biggest lenders compare, from best to worst:
| Mortgage lenders' margins | | | | | | |
|---|
| Lender | July 2000
SVR (%) | SVR
Margin (%) | March 2004
SVR (%) | SVR
Margin (%) | Difference | % Change in
SVR Margin |
| Bank of England Base Rate | 6.00 | - | 4.00 | - | - | - |
| HSBC | 7.74 | 1.74 | 4.74 | 0.74 | -1.00 | -57% |
Nationwide BS | 7.29 | 1.29 | 5.14 | 1.14 | -0.15 | -12% |
Northern Rock | 7.79 | 1.79 | 5.99 | 1.99 | 0.20 | 11% |
Abbey | 7.74 | 1.74 | 6.00 | 2.00 | 0.26 | 15% |
Cheltenham & Gloucester | 7.74 | 1.74 | 6.00 | 2.00 | 0.26 | 15% |
Halifax (HBOS) | 7.74 | 1.74 | 6.00 | 2.00 | 0.26 | 15% |
Woolwich | 7.75 | 1.75 | 6.04 | 2.04 | 0.29 | 17% |
RBS/NatWest | 7.74 | 1.74 | 6.04 | 2.04 | 0.30 | 17% |
Alliance & Leicester | 7.74 | 1.74 | 6.04 | 2.04 | 0.30 | 17% |
Bradford & Bingley | 7.64 | 1.64 | 6.04 | 2.04 | 0.40 | 24% |
What's more, HSBC was the only top-ten lender to freeze its SVR when the base rate was last increased (by 0.25% in February). In fact, at 4.74%, its SVR is the lowest on the high street. This doesn't surprise me: HSBC was the top high-street lender in a Best Buy survey I wrote about in January.
My advice would be not to turn a blind eye to this behaviour. If your lender is hitting you with extra 'stealth' interest, demand a better deal. If it refuses to help - and you can move without paying hefty penalties - switch to another lender. After all, as a loyal existing borrower, why should you pay higher rates in order to subsidise low rates for new customers? This is one occasion when disloyalty really pays off!
More: Find a better loan in the Fool's Mortgage centre | Making A Mess Of Your Mortgage | Ten Things We Hate About Banks.
The author owns shares in HBOS.
