First time buyers charged “obscene” interest rates

Lenders continue to offer mortgages at an “obscene” rate of interest despite the cost of interbank borrowing falling to a record low.

Paul Holmes, chief executive of first-time buyer advice site Firstrung, said lenders have “no excuse” for the rates they are charging.

Banks and building societies are simply using record low interest rates to boost their profit margins, Holmes claimed.

Although some lenders are offering 95% loan-to-value mortgages, the interest rates on these mortgages can be up to twelve times the Bank of England’s base rate.

“You could argue that £700 as a first-time buyer for every £100,000 borrowed is not bad, but it is very bad in relation to, in truth, where the economy is,” Holmes said.

The amount of money banks are willing to lend has “collapsed”, he added.

“[Banks] will lend, but only on the basis that, ‘we can’t possibly turn this business away’,” he said.

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