Professor David Miles was commissioned by the Government to report on the state of the UK mortgage market some time ago. Professor Miles's findings were released last week and he has slammed mortgage lenders for using existing borrowers on high rates of interest to subsidise the lower rates they are using to attract new borrowers.
Professor Miles wants the Government to give lenders 2 years in which to change their practices and offer all rates to all borrowers.
Our View
Whilst lenders do cross-subsidise, they have to make money and they also have to attract new borrowers. There has been so much publicity over the last 5 years about mortgages and switching to a better rate that the majority of people know whether the rate they pay is good or bad. Even if they do not know, it is not hard to access mortgage rate information, whether by telephone, television or the internet to find out.
Lenders play on borrowers apathy, knowing that they think it would be too much hassle to get the rate changed or move to another lender. If this is the case, who is the fool?