Brokers should try to understand how banks attract funds
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I was surprised to read some of the comments on Mortgage Strategy Online last week with regard to Nationwide increasing the SVR on specialist brands.
Are so many brokers ignorant of the facts of life when it comes to whether the base rate is linked to lenders’ SVRs?
The base rate is irrelevant. No lender can borrow money at base rate. Instead, they have to pay through the nose for investment funds that are being gobbled up by National Savings & Investments and nationalised banks.
To add insult to injury they then have to build up massive liquidity with gilts at less than 0.5%. It doesn’t take a maths GCSE to figure out that a lending rate of 2.5% or even 3.5% is not enough to cover the cost of attracting funds and holding onto them.
Do brokers want any lenders other than nationalised ones to survive? Or would they prefer an even more restrictive marketplace that is dominated by the likes of Northern Rock, Santander, Lloyds Banking Group, the Royal Bank of Scotland and HSBC?
Brokers - stop being daft and start supporting your local building society.
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