Money News

Mortgages: Bailed-out banks more expensive

If you are looking for a new mortgage deal, the bailed-out banks may not be offering the best rates.

Banks that have received support from the government are charging more for mortgages.

The average two-year fixed-rate 75% loan-to-value (LTV) mortgage now has a rate of 4.19%, according financial data website moneyfacts.co.uk.

The average across the bailed-out banks is 4.26%.

Michelle Slade, spokesperson for Moneyfacts.co.uk, said: “The large amount of money that has been pumped into some well-known banks is still a sticky point with many British taxpayers.

“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.”

Cheltenham & Gloucester and Halifax, both part of the 43% government-owned Lloyds Banking Group, have two-year fixes at 4.57% and 4.27% respectively.

Nationalised Northern Rock offers 4.37% on its two-year fixed rate mortgage.

However, Royal Bank of Scotland, 84% owned by the government, has managed to stay ahead of the market for the last 12 months with a two-year rate now at 3.84%.

Leading the way in the market are Santander (4.14%), Barclays’ Woolwich (4.06%), and HSBC (3.99%), which have all survived the crisis without direct state support.

Bucking the trend is the UK’s largest building society Nationwide, which has an average two-year mortgage rate above the average at 4.73%.

Ms Slade said: “Stricter rules for building societies over funding and capital reserves could go some way to explaining why Nationwide also appears to finds itself less able to compete.

“Unless more lenders become willing to lend, the mortgage market will continue to stagnate.”

She added: “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.”