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Are UK banks benefiting from confusion in the mortgage market?

There has been growing concern regarding the profit margin available to UK banks and other mortgage providers in the UK, something which was highlighted by the Bank of England earlier this week. Despite the fact that UK base rates have remained at 0.5% for 18 months now it is not altogether clear whether previous mortgage profit margins have been stretched or at best maintained.

Some experts in the mortgage field believe that banks and building societies have been benefiting from confusion in the UK mortgage market where liquidity has been thin on the ground for first-time buyers and deposit requirements have increased. When you consider that the whole mortgage arena is based upon reward/risk the increase in deposit requirements should in theory reduce the risk. However, figures would suggest that the profit margin available in the UK mortgage arena has risen of late which is to the detriment of home buyers in the UK.

It is very difficult to pin down the UK banking community with regards to profit margins and the risk/reward ratio although with the Bank of England suggesting that margins are now being stretched perhaps now is the time for the Bank of England and regulatory authorities to take action.

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