A very topical post this week as this subject has been in the news quite a bit recently.

A lot of people have been asking us why mortgage rates are so high when the Bank of England base rate has been at 0.5% for months (and has stayed there again this month as well).

As a result of the credit crunch, virtually all the banks have made losses, for a variety of reasons.  Now things are moving back out of recession, those banks are keen to make good their losses as fast as they can.

Banks get money to lend from two sources – either from their customer’s savings or the money markets.   In either case, the cost of that money to obtain is much less than the banks are then lending that same money to you and I.

So banks have just increased the margins and all the money in the middle, they get to keep.

However these same banks are also the same ones that have benefited from bailouts courtesy of the taxpayer and have come in for heavy criticism for what has been reported and perceived as overcharging.

The good news though is that lenders have started cut their rates – just a little start with, but it’s a move in the right direction.

Also there are a few more products out there to chose from, so all in all, things are looking more positive.

It might be a little while yet before things are completely back to the way they were, but every step in the right direction is a positive one.

Don’t forget to check with a good independent broker before you decide what to do and see what is available – impartial advice is really important.