State-owned banks not competing enough, says Moneyfacts
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Research from Moneyfacts shows that some state-owned banks are not offering competitive two-year fixed rate deals, showing an unwillingness to increase their share of the mortgage market.
It says despite the Bank of England dropping its base rate to the historic low level of 0.50%, some lenders have not been eager to pass on the cut.
Some state funded lenders such as Royal Bank of Scotland performed well, while others such as Cheltenham and Gloucester, Halifax and Northern Rock have struggled to meet the same grade.
Between March 2009 and March 2010, two-year fixes from, C&G, Halifax and Northern Rock maintained above the 4% mark, with Northern Rock and Halifax offering rates above 5% at their peak.
Royal Bank of Scotland however offered some of the most competitive deals ranging from 3.27% to 4.04%.
Michelle Slade, spokesperson for Moneyfacts.co.uk, says many hoped that the state owned banks would be at the front of the queue for unlocking the mortgage market, but this isn’t the case.
She says: “Some state funded banks appear to place a higher priority on getting out of Government ownership, rather than helping with competitive rates the customers who supported them.
“The notable exception is Royal Bank of Scotland, which currently offers some of the most competitive rates on the market.
“Stricter rules for building societies over funding and capital reserves could go some way to explaining why Nationwide BS also appears to finds itself less able to compete.
“Some lenders still appear more willing than others to lend, and bringing increased competition to the market through more competitive rates.”
She adds: “In the last year, only a handful of mortgage lenders actively promoted their products in order to increase their share of the market and it is these lenders that have come out well in our survey.
“Unless more lenders become willing to lend, the mortgage market will continue to stagnate.
“The pricing in the mortgage market remains disjointed between the rates on offer and the cost of funding, with each lender taking a widely different view of the margin of risk they are applying to their mortgages.
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Readers' comments (1)
Rob Hayes | 8 Mar 2010 1:08 pm
I suppose they're damned if they do (unfair competition) and damned if they don't (failing to stimulate the economy).
I would rather they did what they think is commercially sensible (they will surely have different starting positions and cannot be expected to act in unison) so that they can repay our "investment" and get back to being commercial entities as soon as possible.
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