Are banks profiteering?

Telegraph - The difference between the Bank of England's benchmark interest rate and the average rate on a tracker mortgage has risen from 1.18 per cent at the beginning of April last year to 3.20 per cent today, according to personal finance website Moneyfacts.co.uk
The Bank of England has aggressively cut its Bank rate from 5 per cent in October to a historic low of just 0.5 per cent in an attempt to revive the economy.

While existing borrowers with a tracker mortgage will be enjoying the drop in rates, new borrowers are being badly hit. HSBC has announced it is launching a tracker loan charging 4.09 per cent above the Bank rate.
The margins on the average two-year fixed rate deal has risen from 1.19 per cent above the two-year swap rate - which is the rate that lenders use to price their fixed rate mortgages – at the beginning of April last year to 2.41 per cent above the rate today, Moneyfacts said.
Despite two-year swap rates dropping by 3.03 per cent since the beginning of last October, the average two year fixed rate mortgage has been reduced by just 1.64 per cent over the same period, it said.
It comes after billions of pounds of financial support from the Government has been given to the banks during the credit crisis.
Andrew Montlake, of mortgage brokers Coreco, said: "Banks are taking the opportunity to widen their margins to claw back of the profits that they've lost during the credit crisis. Every time they launch a new range of deals, the margins seem to be even bigger, specifically on tracker rate deals."
The average rate charged on a two-year fixed rate deal is currently 4.64 per cent, compared with 3.70 per cent for the average two-year tracker, according to the research.
Michelle Slade, analyst at Moneyfacts.co.uk, said: "Since base rate started falling in October 2008, mortgage lenders have continued to increase their margins.
"While existing tracker customers have benefited, anyone looking for a new tracker deal has seen the margin over base continue to increase. The vast majority of providers have passed much bigger cuts to their savings rates, when compared to their standard variable rate as once again they increase their margins."
An HSBC spokesperson said: "HSBC's tracker mortgages are regularly the lowest in the market. Mortgage interest rates reflect the risk of lending in the market, in the current environment it is not surprising that they are higher than previous years."

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