Consumer Council Asks Lenders To Justify Higher Mortgage Rates

The Jersey Consumer Council wants to know why mortgage rates are much higher here than in the UK.

The JCC has written to lenders asking them to justify the higher cost of borrowing in Jersey compared to products they offer in the UK.

The letter has been prompted by a rising number of islanders contacting the JCC, wanting to know why they are paying a higher percentage then borrowers elsewhere.

The letter asks for a 'comprehensive response' within three weeks:

"We kindly request that you provide a detailed explanation justifying why the basic mortgage rates offered in Jersey are higher than those provided by your parent or equivalent lender in the UK."

"This will allow us to address consumer concerns and keep them informed of our progress in determining the reasons why, on the face of it, Jersey customers are treated differently to those in the UK, particularly when our jurisdiction offers a more stable housing market."

Carl Walker from the JCC says even a 1% difference puts hundreds of pounds more on monthly repayments.

"We know that the banks that operate here under the same banner or brand a their UK counterparts are ring-fenced and maybe separate international entities, however, they are still intrinsically linked to the Bank of England base rate and when we see the Bank of England put their interest rates up, Jersey mortgage rates immediately follow.

We do not really understand the excuse that they are completely separate so they can charge what they want, but as soon as mortgage rates jump up in the UK, they follow here."

Borrowers in Jersey already have a smaller choice of mortgage lender, and Carl says the limited competition in the market makes it even more essential that rates are competitive and fair.

"We know that Jersey is a more secure housing market, we know that average earnings are greater, we do not see mass redundancies over here, so those risks should be lower . Therefore, in practice, the rates should also be lower.

It does not make sense to us why there seems to be this 'Jersey premium' added to our mortgage interest rates."

Market conditions, regulatory environments and operational costs all contribute to the determination of mortgage rates.

Carl says the Consumer Council has been talking to the Housing and Treasury Ministers about finding answers to its questions.

"Collectively we can then get the answers that we are looking for and determine what we want to do next, whether that is through applying pressure, going to the regulator or whether that is through a need for the government to open up the market greater.

We are not quite sure yet, but this is the first step towards trying to get a better deal for everyone."

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