As the title says, numerous banks in the U.K., maybe across the world, are raising interest rates on mortgages, and the given reason is cause inflation hasn’t fallen as much as expected. Can anyone give me a basic inflation, other than greed, as to why they’d do this?
They are upping the rates on their fixed rate deals ( 5.84% for the next two years for example).
Because these rates can’t be changed once agreed the banks forecast what they think the cost of their borrowing will be over the next two years (based on the central bank/gov interest rates) and set a customer facing rate that is competitive but will make them good money.
They have been setting their rates with the assumption that the government set interest rates will fall sharply this year. That would mean they could give customers an interest rate that’s lower than the current government rate now because in a years time the government rate will have fallen and the customer would still be paying the fixed (higher) rate they agreed. (Making the bank good money)
However, inflation is proving more entrenched than expected and the government isn’t reducing interest rates like expected. The banks are therefore not offering those lower interest deals to customers as they’re not expecting to make it back later.