Lenders speaking at Sesame’s symposium conference in London today claimed mortgage rates next year would be less linked to base rate and LIBOR and would consequently start to climb in 2012.
Matthew Wyles, group distribution director at Nationwide, said the reason was as wholesale money markets remained frozen, banks and building societies were being forced to raise funds to lend by offering more and more competitive savings and investment rates.
He said: “Retail investors will command as much if not more next year than this and that has to be financed at a margin either out of more risk taking or out of higher mortgage rates. It’s a really simple algorithm. It has got to be one of those.”
Mike Jones, director of intermediaries at Lloyds Banking Group, agreed saying there was already huge competition in the deposits market.
He added: “The regulatory action is forcing that to happen because we’re having to match fund our lending book against similar periods of deposit taking. Base rates will be the same next year and will move up in 2013 but that’s increasingly irrelevant to the prices in the market.”
Meanwhile David Finlay, intermediary channel director at Barclays, said: “Net interest rate margin will be the thing that will decide what mortgage rates will be going forward.”
