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Mortgages 'decoupled from Libor'

Tuesday 9th June 2009

Mortgage rates are in Limbo after becoming decoupled from the London Interbank Offered Rate (Libor), it has been claimed.

According to moneysupermarket.com, average mortgage rates have risen independently of both the Libor and the Bank of England's base rate.

The website states that rising profit margins on lending shows that the Bank is increasingly toothless when it comes to keeping the cost of mortgage borrowing low and that banks are making money at the expense of their customers.

Last year the average lowest rate tracker product was 0.22 per cent above the Libor Rate, it now stands at 1.99 per cent above.

Meanwhile, the average three-year fixed-rate deal stood at 0.16 per cent above the Libor a year ago and is now 2.78 per cent above it.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "Lenders are benefitting from the fact that demand for mortgages outstrips the supply of mortgage deals and, as with any market, when supply is limited it causes prices to rise."

Since the banks admitted last year that mortgages have never been linked to the base rate, perhaps it is time for them to admit that the Libor has nothing to do with lending either.

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