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&#39Mortgage banks rip off their borrowers&#39

Nationwide Building Society has launched a scathing attack on mortgage banks, accusing them of ripping off longstanding existing borrowers to subsidise cheap deals for new customers.

Chief executive Brian Davis says the mortgage market has become “perverse”, with major lenders offering substantially better rates for new borrowers than for existing customers who are stuck on high standard variable rates.

Davis warns that, by exploiting the inertia of long-standing borrowers, banks are running the risk of losing custom to other lenders with lower rates.

The society estimates there are three million borrowers with mortgages totalling £100bn on standard variable rates. It says increases in remortgaging shows a growing recognition among borrowers that they cannot trust their lender to give them the best deal available.

Nationwide says if banks cut their SVRs to a similar level to that of new borrowers, it would lead to an overall saving of around £1bn a year for existing customers.

From March 1, Nationwide&#39s mortgage base rate will be 6.49 per cent for new borrowers, simultaneously switching 500,000 existing custom-ers from its standard rate of 7.09 per cent to the new rate. The move will make it more than 1 per cent cheaper than many of its closest rivals.

The society says a customer paying 6.49 per cent on a £60,000 mortgage will save over £600 a year.

The move has prompted rival lenders to reconsider their rates.

Davis says: “The mortgage market has become increasingly perverse. Nobody should be paying 7.5 per cent on their mortgage.”


Sun Bank launches discount flexible mortgage rates

Sun Bank is launching a new discounted rate on its flexible mortgages. Borrowers pay 5.49 per cent, a discount of 1.25 per cent until October 2001 from the variable rate, currently 6.74 per cent. Special status flexible mortgages, for the self-employed, are discounted for the same period by 0.5 per cent to 7.44 per cent […]

Davies blocks Cousins quizzing civil servant

FSA chairman Sir Howard Davies has been attacked by the Treasury select committee for his handling of the Equitable Life inquiry. Davies came under fire from MPs last week after he refused to allow Labour MP Jim Cousins to question FSA head of insurance Martin Roberts about his role in the affair as both DTI […]

&#39Move to fees may scare off low earners&#39

Intelligent Finance warns that any moves towards feebased advice could backfire and deter people on low incomes from seeking financial advice. Research commissioned by IF shows that nearly 60 per cent of respondents would be more likely to seek advice under a commission-based system than if they had to pay for advice. Within lower-income groups, […]

Govett revamps IFA website

Fund manager Govett Investments has set up a website for IFAs and investors. The company says it has invested around £350,000 on upgrading its old site to provide more up-to-date and interactive services. IFAs have a password-protected area at the site at www. which provides commission details, IFA sales team contacts and Govett research […]

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