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Skipton boss says Govt policy could force others to hike SVRs

Skipton group chief executive David Cutter says that distortion caused by competition from Government-backed banks could force other lenders to increase their standard variable rates.

In an interview with Money marketing, Cutter says the UK savings market is highly competitive, and this is magnified by the presence of guarantees given to nationalised banks.

He says: “The UK retail savings market is highly competitive and there is a distortion caused by the implicit guarantee given to the nationalised or part-nationalised banks.

“And as long as interest rates remain so low, and the disconnect which now exists between average cost of retail funds and base rate remains, if people want to remain competitive in the retail savings market then they need to pay for that by earning a desired return on your mortgage assets.”

Cutter adds that if the base rate remains at a record low level, other lenders may be forced into following suit.

He says: “It is not for me to predict how other lenders will react, but if base rate does remain low for a considerable time, and if competition in the retail sector remains extensive, then there will be pressure to raise mortgages.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Fraser Brydon - IFA 22nd January 2010 at 4:08 pm

    Cake and eat it springs to mind, if you can’t manage your business in a competitive market then step down….you guys caused the markets to collapse, put your hand out and then bite the one who feeds you…pathetic.
    Skipton bought from the wholesale market and lent at above average rates, they were never a great deposit taker…now look they can’t manage simple maths….

  2. That is rubbish everyone is just out for increased margins of profit. Customers savings rates show poor returns in comparison to SVR rates charged by most Lenders.

  3. I UNDERSTAND THE REASONS FOR DOING THIS BUT PLEASE TELL ME THAT MR CUTTER WILL IF THE BOE INCREASES THE RATE BY .5% THE SKIPTON WILL REDUCE THE SVR BY THE SAME IMMEDIATLEY OR WILL HE FOLLOW IN THE FOOTSTEPS OF ENERGY COMPANIES?

  4. I believe Cutter does have a point about Govt. backed banks. As I understand it the banks have been supported but not the Building Societies. Another example of Brown getting it wrong.
    GB was all in favour of level playing fields for taxing investments when he raided Pension Funds but when it came to Lloyds taking over HBOS in a deal that HE needed then the competition authorities were told that was a no go area.
    Lots of unintended consequences here I believe.

    Having said that have margins actually been eroded by as much as this action suggests? I doubt it, more likely the Skipton are just pricing for what they believe they can get away with. Unfortunately others will follow if they believe they can do so. Gone are the days when everything was linked to BoE base rates!

  5. Am thankful that I moved to BoE base + 0.50 in Nov 2008.

  6. Skipton should stop being a mutual and float on the stcokmarket. They sold out years ago and although they try to sell the benefits of mutuallity they are in it to make a profit just like the plc’s.

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