Are Banks Ripping Off Loan Customers?
With the way that many individuals feel about their bank, and financial institutions in general, at the moment, it would be no surprise to learn that the answer to this question is a resounding “yes” from the majority of consumers.
This general feeling has been backed up by new research from the financial website Moneyextra.com, who have accused the main high street banks of “profiteering” from their loan customers, by charging them high interest rates on their homeowner loans, whilst the bank base rate of interest remains at an all time record low level of 0.5 per cent.
The accusation regards those borrowers who are ending the initial deal on their loan with their current lender and being placed on the standard variable rate of interest. The average homeowner loan rate is now around 4.66 per cent above the bank base rate, which has increased from just 1.9 per cent in mid 2008, equating to an increase of 145 per cent in the space of one year.
Moneyextra.com have estimated that banks are making a profit of £20.1 million every month from their loan customers, by not passing on realistic savings from the reduction in interest rates.
Richard Mason of Moneyextra.com said “This is blatant profiteering by our banks, they are shoring up their balance sheets by charging huge rates for existing borrowers, but offering tiny rates to savers. While a lot of deluded customers have recently taken advantage of a reduction in their monthly mortgage payments, what they fail to understand is that the full benefits of the rate cuts are not being passed on to them, savers are also facing a poor return as banks waste no time cutting their rates. Consumers are being treated like profit-fodder as banks prey on their lack of financial understanding.”
