Have UK mortgage rates bottomed out?
The British Bankers Association has defended the mortgage industry which has come in for significant criticism over the cost of mortgages in the UK. Despite the fact that UK base rates are still at 0.5%, mortgage rates remain relatively high, in excess of 5% in general, and it is believed that mortgage profits for UK banks have increased nearly four-fold in recent months. Why have mortgage rates not fallen further?
The British Bankers Association has commented upon the situation in the UK and stressed that the UK government and regulators have forced UK banks to increase their cash reserves so as to give greater stability to the sector and more confidence to consumers. They claim that UK banks currently have twice the average in reserve compared to worldwide banks, something which the UK government "instructed" some time ago.
So in effect UK banks have excess liquidity tied up in their reserves which has meant that UK mortgage rates have not fallen in line with UK base rates. The perfect balance between regulatory concerns, confidence and liquidity has yet to be found although time is running out for many people across the country. In the current climate it seems as though UK banks are damned if they do and damned if they don't!
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