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Lenders defended from rate hike accusations
17 April 2008 11:47
Lenders are charging higher rates because of the cost of funding their mortgages, a research consultancy has claimed, although the extent of their hikes has been surprising.
After the Bank of England lowered the base rate from 5.25 to five per cent last week, Peter Bolton King from the National Association of Estate Agents urged lenders to pass the cut onto borrowers and many have since been criticised in the press for not doing so.
Yet Capital Economics' UK economist Paul Dales has insisted that mortgage providers are keeping their rates higher because of higher funding costs and that institutions that are less exposed to the wholesale markets have not raised their rates as substantially.
He argued that banks were not purely seeking to maximise profits or take advantage of the current situation, but he did express surprise at how marked their rate increases have been, at how widespread the hikes were and at how many products had been withdrawn.
Mr Dales was, however, less taken aback by the Bank of England's refusal to reduce the base rate more rapidly given its ongoing concerns about inflation, stating that the situation was hardly encouraging but nor was it particularly extraordinary.
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