19. September 2009 14:34
The Royal Bank of Scotland (RBS) has increased its mortgage margins by up to 0.7% in order to maximise its benefit from low wholesale funding costs.
The question is, should a taxpayer-owned bank be restricted from making more money off its existing customers, the majority of who are taxpayers paying now and in the future to support the bank that almost failed?
Public ownership controversies aside, RBS isn't the only lender to raise margins while the base rate seems to be staying at rock bottom for the long run.
Nationwide, for example, has also raised its rates by a similar amount. It's possible that both lenders are doing this to dissuade a surplus of applications on certain products.
Of course, it's nothing new that mortgage lenders take advantage of falling base rates to boost their own margins. Michelle Slade, of Moneyfacts.co.uk, noted that "lenders remain slow to act on the falling cost of funding. [They] are quick to pass additional costs on when [base rates] are rising, but are less keen to put rates back down again when the cost of funding declines."
RBS attracts a different kind of criticism because of its high-profile rescue with public money. Do you think this criticism is justified?