Mortgage Lending Up, Margins on Mortgages Increase
While it was reported today that mortgage lending for June was up by 15%, it was also noted that banks are not passing on cheaper loan rates to customers, with margins reaching a 20 year high.Mortgage lending in June was boosted by the abolition of Home Information Packs, with lending up 15% to £13.1bn from £11.4bn in May. However, overall transaction levels are still low, with buyers constrained by the low level of available credit.
It appears that lenders are more interested in repairing their balance sheets than chasing new business. Consequently, margins on fixed-rate mortgages have reached a 20 year high as swap rates fall faster than the cost of mortgages.
The average 3 year fixed rate mortgage is 5.56% with the margin over swap rates reaching 3.11%.
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