Lenders will hike fees as spreads fall
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Major lenders are planning to hike mortgage fees in the next three months to compensate for a reduction in spreads, data from the Bank of England reveals.
Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and the Royal Bank of Scotland all submitted data for the Bank’s latest Trends In Lending report. It also provides further analysis of the Bank’s Credit Conditions Survey published at the beginning of October.
It reveals that the major lenders are forecasting an ease in spreads between the base rate for variable mortgages and the relevant swap rates for fixed rate mortgages over the next three months, which would ordinarily mean mortgages priced at a lower rate.
But the report also says that lenders are moving towards increasing fees in the next three months to counter the reduction in spreads.
There have been signs that conditions in the wholesale money markets have eased in recent weeks.
But although lenders have told the Bank that they are encouraged by these issues most feel mortgage funding will remain hard to come by.
Michael Coogan, director-general of the Council of Mortgage Lenders, says: “Funding conditions remain challenging despite the encouraging signs of a slight thaw in wholesale funding markets.
“The Bank’s report confirms our own assessment of market prospects that the most likely scenario is going to be a slow and long drawn out recovery.”
Lending figures from the CML show that gross mortgage lending totalled an estimated £12.5bn in September, up 2% from August but down 27% from September last year.
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