Don't the banks owe us a break when times are tough?

7:19pm Thursday 17th April 2008

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THIS column is not noted for its economic incisiveness, so forgive me if I am being naive - but aren't the banks really letting down the public over mortgages?

Once again, the poor sap on the Wycombe omnibus is the guy shouldering the burden for problems in the money-market.

And once again, that poor sap is Yours Truly, whose five-year fixed term mortgage ends in July this year.

It looks like I am going to take a hefty financial hit - even though bank interest rates have been going steadily down over the last few months.

I'm fairly green in these matters and have therefore been innocently been keeping an avid eye over the Bank of England's treatment of interest rates.

I was always brought up to believe that if rates went up, so did our mortgages. And vice versa - if rates went down, we all benefited from a cut in monthly payments.

Therefore, I had no particular complaint when rates went up massively during the fixed term of my mortgage. I was protected by a super rate of 4.39 per cent, but I braced myself for a whacking rise in July when my five-year period was due to end.

I work on the principle of you win some, you lose some. I had reaped the dividends of low rates and would have to accept higher payments if the economy was in trouble by the time I came to renew my deal.

But then, joy of joys, the Bank of England decided to cut rates because of pressure on the economy.

I started looking forward to a lower deal this summer. There'd still be an increase on my previous rate, but it would be manageable - and not the £300 monthly rise I had initially feared.

Last week, the Bank of England announced its latest .25 per cent cut and I eagerly went online to see how my mortgage lender had reacted.

How much had my bank cut its fixed rates?

Er, it hadn't. It had actually put them up.

I found myself staring at a load of confusing figures of the various fixed rate deals - all generally higher than they'd been before the Bank of England cut rates.

If I wanted my bank's best rate, I'd not only have to pay much more than I do at present - but I'd have to hand over a fee of £599 to get it. So in a nutshell, I'd have to pay them 600 smackers for the privilege of paying them more each month.

Are they having a laugh?

There's been a lot of stuff in the news this week about the banks talking to PM Gordon Brown about their problems. Apparently, life is much harder for them these days. They are finding it harder to borrow cash and their margins have been hit.

I feel for them, I really do. In a capitalist society, big organisations have to make profits, otherwise staff lose their jobs. So I don't blame them for trying to protect their own.

But equally vulnerable are the millions of home owners they serve who have tied themselves into 25 year mortgages and are basically now stuck.

As bad as it's going to be for the banks, it's a lot worse for these people who ultimately could end up losing their homes and be forced out on to the streets if rates become unmanageable.

The banks have a captive market of home owners who they wooed and pursued during the good times. Don't they owe these people a break when times are tough?

I rang my bank on Tuesday to try to get a feel of things. I was told on its website it would be offering loyalty deals to existing customers.

If these deals existed, I couldn't work them out. Instead, the girl who spoke with me insisted she could only give me information and was not allowed to advise.

Then after our conversation came to a close, she insisted on reading me some standard script about how she hadn't advised me.

I ended up more confused and worried than when I started. It's a minefield and once again the hard-working tax-paying mules of middle England are shouldering everyone else's financial burden.

As in the case of council tax, you can't help but feel the establishment is taking the mickey out of us.

I don't pretend to be an expert on this. But once I cut through all the jargon and confusion, just one simple fact stands out.

They want me to pay £600 for the privilege of staying with them and paying a higher monthly fee to them for the next few years.

If it was fiction, no one would believe it.