Prudential national mortgage club manager John Malone has defended mortgage lenders against an attack from Professor David Miles in his interim report published last week.
Miles was asked by Chancellor Gordon Brown in April to look into reasons for the lack of take-up of long-term fixed-rate mortgages in the UK.
The interim report said that lenders are cross-subsidising cheap discounted mortgages with funds from existing customers on their more expensive standard variable rates. But Malone says that far from complacent borrowers funding the more astute, lenders' back books are getting smaller.
Charcol senior technical manager Ray Boulger says he believes Miles is mistaken about the number of borrowers on SVRs. Miles estimates that about 40 per cent of borrowers pay SVRs or something close to it.
Boulger says the proportion of most lenders' mortgage books on SVRs is as low as 15-20 per cent although this translates to a higher proportion of actual borrowers (25 per cent).
He says: “I have raised this point with David Miles and I suspect he will look closely at it for his final report. There is an element of cross-subsidisation here but it is smaller than what he thought.”
Malone says: “Lenders' back books have changed significantly in the last few years and are getting smaller rather than funding discount deals.”