UK Banks Make More Profit form Loans

The Bank of England in its latest quarterly bulletin revealed that the banks in UK are making excessive profits by the charging the borrowers on their loans. The bank quashed the lender’s argument that the rising loan charges were only an increase in the cost born by them.

According to a recent survey, the homeowners are now paying more than £1,700 a year on a fixed rate mortgage than they would have paid on the same deal before the financial crisis.

The Bank’s research found that since the financial crisis, the funding costs of the lenders have risen much and they wanted to take steps on future losses. The operating costs or the product fees associated with the mortgage deals have not changed significantly, the Bank argued.

The Bank however clarified that these excess charges are necessary to repair the damages done to their balance sheets. Rebuilding profits are important for UK banks because it should ultimately lead to lower funding costs, it said.

The Bank’s research would be examined by the government’s Independent Banking Commission. The Commission would also look whether there was enough competition among the banks in UK. According to Mr. Ray Boulger of mortgage broker John Charcol, the consumers were getting a “rotten deal”from their banks because of the lack of competition.

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