HSBC hits at loan 'rip-offs

HSBC has accused its retail banking rivals of ripping off homeowners to the tune of £1.27bn since July 2000 by failing to pass on the full benefit of lower borrowing costs.

Despite two interest rate rises since last November, the cost of official borrowing set by the Bank of England is still two percentage points lower than in July 2000.

The standard variable rates (SVR) charged by the UK's three biggest lenders - Halifax, Abbey National and Cheltenham & Gloucester - has fallen by only 1.74 percentage points over that period, HSBC said yesterday.

If mortgage lenders had passed on the full reduction to their borrowers, someone with a 25-year, £100,000 repayment mortgage would have seen monthly payments fall from £763.39 to £635.87 since July 2000.

Instead, the average monthly payment for those on standard variable rates stands at £651.88, according to HSBC's calculations, a difference of £192 over a year.

Since July 2000, eight of the 10 largest lenders had increased the difference between the Bank's base rate and their SVR, with only Nationwide Building Society and HSBC reducing it. Several lenders have standard variable rates which are higher now than when base rates were last at 4%, at the end of 2001.

Clive Wood, head of banking and mortgages at HSBC, said: "The lower the base rate, the bigger the profit, which can't be right. When money is cheap, the benefits should be passed on to customers by lenders, not siphoned off."

Nationwide cut its margin by 0.15 of a point after reducing its SVR from 7.29% in July 2000 to 5.14% in March this year, while HSBC reduced its margin by one point after relaunching its SVR as its Homebuyer rate in mid-July 2000 and failing to pass on the latest interest rate rise.

HSBC's rivals said that few of their borrowers were on the standard variable rate, with most having more competitive, short-term deals.

A Halifax spokesman said: "Only 10% of our book is now on an SVR, and more than 1m people have been moved on to better deals during the past three years. We also pay 3% on our current account, compared with 0.1% for some high street banks."

An Abbey National spokeswoman said: "Our SVR is a reversion rate which people go on to after a fixed-rate or discount deal has ended. It is unlikely that anyone would go straight on to it, or remain on it for any period of time."

A spokeswoman for Cheltenham & Gloucester, part of Lloyds TSB, said: "It's up to each individual lender to determine its own rates policy and how it responds to changes in interest rates.

"C&G sets its rates to provide a fair and reasonable balance to both our borrowers and savers with rates that are competitive within the market place."

A Treasury-commissioned study of the housing market this year accused the banks of using cut-price deals for new borrowers as a loss leader to attract new customers, with the costs being underwritten by millions of their existing customers through "undesirable" cross-subsidisation.