Over £100 added to mortgage due to bank bailouts

According to a recent report over £100 a year has been added to every mortgage in the UK as a result of the cost of bailing out the Icelandic banks and the Bradford & Bingley earlier this year. The data comes from a senior official at the Building Societies’ Association, which claims that as a result of the bailout home loan rates have been increased by 0.1 percent.

It is obligatory for banks and building societies to help find the Financial Services Compensation Scheme, which was used for the bailout of these banks. Combined contributions from banks and building societies have rocketed from £30 million a year to more than £1 billion a year. This followed the rescue of Bradford and Bingley and the Icelandic banking collapse.

Building societies’ own fees have gone up as a result of the bailout, which has affected borrowing costs, and the BSA official said: ‘Even now we have not been told what the impact of the Icesave bailout will be on societies’ contributions to the FSCS, so we already have a known unknown in the system to try to address.’

One mortgage broker stated: ‘Savers are much more important to building societies at this time and it is no surprise which option they choose if they have to decide whether to lop of bit off savings rates or add a bit to mortgage rates.’