Home News Santander accused of "profiteering" after huge mortgage rate hike
Santander accused of "profiteering" after huge mortgage rate hike
Thursday, 23 August 2012 08:57

News round up: Santander, Greece, Cuts, Borrowing costs, Tax rules.


Santander (NYSE:SAN) was accused of "profiteering" last night after it sneaked out a huge mortgage rate hike in letters to customers. Britain's second-largest mortgage lender - it has 16.8 per cent of the mortgage market, only beaten by Lloyds Banking Group plc (LON:LLOY) with 19.9 per cent -  told borrowers it is increasing its standard variable rate (SVR) from 4.24 per cent to 4.74 per cent – an increase of almost 12 per cent.

The Spanish-owned bank has also hit customers on a rate cap by raising its SVR cap margin – the maximum amount above the Bank of England base rate it can charge. The margin will increase from 3.75 per cent to 4.99 per cent next month, meaning customers on the now useless cap could see the rate rise to 5.49 per cent.

Santander refused to divulge how many customers will be affected by the increase – which comes into force on 3 October – but estimates suggested up to 300,000 may be hit. The bank already came under fire this month for scrapping a promise of free banking to 230,000 business customers. The "free forever" promise was made when the bank was still called Abbey National, reports the Independent.

Greece

Greece has "one last chance" to meet its bail-out conditions, according to Jean Claude Juncker in comments that crushed hopes for an imminent change of strategy for Athens and the Eurozone. The head of the eurogroup emerged from a highly-anticipated meeting with Antonis Samaras, Greece’s prime minister, only to signal that there would be no leniency for Greece from Brussels.

"The ball is in the Greeks’ court", said Mr Juncker, arguing that Greece’s real problem was a “credibility crisis” which could be resolved if it stuck to the bail-out terms and implemented all the planned reforms. Hours earlier Mr Samaras had pleaded for a "little room to breathe" in the form of an extension of the austerity deadlines set by Greece’s bail-out, The Telegraph reports.

Cuts

A bad week for the Chancellor got even worse yesterday when the economist he appointed to the Office for Budget Responsibility warned of a straitjacket of "self-defeating" cuts. Only days after it was revealed that the public finances plunged unexpectedly into the red last month and a poll found that confidence in the Chancellor had hit at a record low, Kate Barker urged George Osborne to rethink his approach to deficit reduction. Ms Barker, a non-executive member of the OBR, argues that Mr Osborne’s insistence that there should be no deviation from the fiscal plan may be making it more difficult to respond to economic events.

"There is a danger of self-defeating austerity, if some room for manoeuvre cannot be developed," she said. "There is a risk that the fiscal mandate, rather than a useful discipline, will become a straitjacket." Ms Barker also criticised government plans to create a Financial Policy Committee at the Bank of England and said it was delegating too much power to Threadneadle Street, The Times says.

Borrowing costs

Britain’s second largest lender has dealt a blow to government plans to keep borrowing costs low by raising a key mortgage rate. Up to half a million homeowners with Santander are set to see their repayments jump by an average of £300 a year from October. The bank blamed higher costs for the decision but the move is sure to irritate ministers as they desperately seek plans to boost the flagging economy.

The increase comes only a month after the Treasury and Bank of England sought to boost lending and lower borrowing costs by offering banks £80bn of cheap funding. Justin Urquhart Stewart, of Seven Investment Management, the wealth manager, said: "Santander’s decision flies straight in the wind of what the Government and the Bank of England are trying to achieve with the Funding for Lending Scheme, which is intended to lower borrowing costs and make it easier to get credit," The Times reports.

Tax rules

The Treasury is facing criticism for its plans to relax tax rules for multinational companies. Changes going through Parliament "will incentivise multinational corporations to shift profits into tax havens", according to MPs on the International Development Select Committee. The move will cost the Exchequer £1bn in revenue, and is being done to make Britain "more competitive".

But it is likely to cause embarrassment for the coalition, because the Liberal Democrats made tackling tax evasion and avoidance a priority. The 2012 Finance Bill is changing the rules governing Controlled Foreign Companies, ending the requirement for UK-owned corporations that report profits in jurisdictions with corporation tax lower than 23% to "make up the difference" to HM Revenue and Customs.


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