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Royal Bank of Scotland announces no change in mortgage rates

The Royal Bank of Scotland, which is effectively controlled by the UK government, has today confirmed there will be no change in its variable mortgage rate. The company, seemingly going against UK government policy, has suggested that it has both an obligation to mortgage holders and savers in the UK and a reduction in the variable mortgage rate would lead to a reduction in savings rates. But does this really stack up?

When you consider that the vast majority of savings accounts in the UK are attracting 0% or near 0% interest this argument appears fairly weak. In the real world the Royal Bank of Scotland, and other banking institutions, are effectively widening their profit margins by benefiting from any slight reduction in the cost of finance while retaining their rates at current levels. This is yet another blow to the UK property market although in reality mortgage rates are low enough to attract interest if buyers were there.

The Royal Bank of Scotland may be one of the first to confirm a "no change policy" but there is little doubt it will not be the last of the UK banking institutions to take such a stance. However, this will not help the image of the banking sector which has benefited from substantial taxpayer investment yet apparently seems unwilling to give anything back.

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