Bailout banks offer worst deals

Moneyfacts has revealed that state-funded banks charged higher than average rates on their products over the last year, despite the Bank of England base rate remaining at 0.5%.

In a study of the average two-year fixed-rate mortgages at 75% LTV offered by the main banks over the last year, Moneyfacts found that Cheltenham & Gloucester (C&G), Halifax and Northern Rock were the most uncompetitive banks.

In March 2010, the average charged was 4.57% from C&G, 4.37% from Northern Rock and 4.27% from Halifax while the market average stood at 4.19%.

Michelle Slade, spokesperson for Moneyfacts, said that some State-funded banks appeared to be more preoccupied with removing themselves from Government ownership rather than offering competitive rates.

Research from Realcomparison backed up claims from Moneyfacts by showing that State-funded banks currently offer just eight of the 50 best-buy mortgages in the market.

It analysed best-buy deals at 60%, 75%, 80%, 85% and 90% LTV and found that state-owned lenders were only competitive on 80% and 85% LTV products with Royal Bank of Scotland offering two products in each bracket.

A spokesperson for Lloyds defended its mortgage lending and said the bank has worked incredibly hard to maintain a comprehensive range.

Michael White, chief executive of Email Mortgages, said it made sense for state-owned banks to keep new mortgage lending to a minimum.

He added: “State-funded banks are caught between a rock and a hard place. They want to make sure that their balance sheets are strong, so they never need Government money again, which means they cannot offer competitive rates.”

Daniel Clayden, director of Clayden Associates, said the banks needed to make finance more available or else the housing market would stall.

He said: “If there is complete rigidity from these banks, the wheels of the economy will not move.

The property market revival will be undermined if they fail to improve the availability of mortgage funding and offer fairer rates.”