Mortgages cost £200 too much

Homeowners are being overcharged by almost £200 a year as mortgage lenders fail to pass on the full drop in interest rates, it has been revealed.

The HSBC bank said its rivals have manipulated rate changes to hit house buyers who use the standard variable rate mortgage.

Since July 2000, the Bank of England's rate has fallen by 2 per cent to 4 per cent.

But the standard variable rate mortgage of the UK's three biggest lenders - Halifax, Abbey National and Cheltenham & Gloucester - has fallen by only 1.74 per cent.

Someone with a 25-year, £100,000 mortgage would have seen their monthly payments fall from £763.39 to £651.88.

But they should have fallen to £635.87 - a difference of £192 over a year. The difference is even bigger on an interest-only mortgage, with those customers paying £260 more.

HSBC said the failure to pass on the full cut in base rates has earned the major lenders an extra £1.27billion since July

2000.

The bank's research reveals that eight of the ten biggest

home loan companies have kept charges higher.

Only Nationwide Building Society and HSBC have reduced them to their correct levels.

Clive Wood, head of banking and mortgages at HSBC, said: 'The lower the base rate, the bigger the profit, which can't be right. When money's cheap, the benefits should be passed on to customers by lenders, not siphoned off.'

About one in two house buyers - five million - have a home linked to the standard variable rate mortgage.

Most will have been with their lender for years.

Many are on special discount loans which offer a reduced interest rate for the first few years.

One of the reasons for lenders keeping SVR rates up has been to raise cash which is used to subsidise cheap deals designed to attract new customers.

Many borrowers stay with a lender after a deal comes to an end, when they are then put on to the higher SVR charges.

However, customer loyalty has been penalised by the banks which have increased the gap between their SVR and the Bank of England base rate in recent years. The big mortgage lenders defended their stance.