French lenders put profiteering UK counterparts to shame
The average mortgage rate in the UK, by contrast, is currently 3.63%, despite the UK base rate being 50 basis points lower than the euro area base rate of 1%. In short, the margin the UK banks are making is considerably higher than that of their French counterparts.
The profiteering of the UK banks is only part of the problem, according to Athena Mortgages. In France, some three quarters of mortgage holders have long-term fixed rate loans of 15-25 years, while variable rate mortgages have a +1% cap, meaning they cannot rise by more than one percentage point.
Quite the opposite is the case in the UK, where there is no cap on variable rate mortgages and the majority of fixed rate products are 2-year loans, meaning additional regular arrangement fees for the banks and a market structured around re-rating for maximum profits.
John-Luke Busby, director, Athenamortgages.com, commented: “These official figures highlight the extent to which UK banks are profiteering on the back of borrowers relative to other countries.
“Whereas the French mortgage market is structured to reduce borrower exposure and offer fair rates, the UK market reduces security and is built to churn.
“I am sure UK borrowers would like to have the same peace of mind provided to the French through low rate, long-term loans.
“In France, you can secure an 80% LTV 25-year fixed rate loan for 3.70%, even as a non-resident, whereas in the UK a rate fixed for just four years comes in at just under 4%.”