Bailed-out banks are ripping us off

Rich, that's because Bradford and Bingley is effectively being wound up by the government - all their retail branches and savings accounts were sold to Santander and B&B isn't taking any more customers as far as I know. The government is just waiting until all mortgages are repaid or remortgaged and all insurance contracts run out and then I gues B&B will just cease to exist.

Mark, when you say ripping 'us' off, you are only referring to 'us' as the customer. 'Us' as the taxpayer will benefit from the high prices and higher profits - it'll push the share price up and we'll get more of our money back. I use 'us' in a very loose definition of the word of course, as someone who no longer pays tax in the UK, but the principle's the same.

In fact, I would say that Lloyds is doing what any other business would do in the same situation - fulfilling the wishes of its shareholders. The government, as majority shareholder, wants as much of its money back as soon as possible. Lloyds is obliging through a classic 'skimming' tactic. In a market with more demand than supply (the current mortgage market), the business sets prices higher and so only takes the customers most willing to pay. So if Lloyds has £200 billion to lend, it sets its rates so it only just lends this £200 billion - from their point of view there's no point setting rates lower, just to attract customers that it can't supply. You make the classic non economist mistake of thinking that businesses should prioritise their customers - free market businesses should always prioritise the demands of their owners. Usually, giving the customers what they want also gives the owners what they want, but not when the market is a messed up as this.

@Mark - I guess it depends what you define as keeping lending going. Keeping it going at 2007 rates would be a recipe for disaster in the current climate. If anything, I would argue that lending should be rationed for a while, to ensure the general public doesn't revert to the bad old habits of buying on the never never. In the current situation, government and bank efforts would be better directed at helping small businesses get the start up capital they need, than subsidising short term unproductive home ownership.

And let's be honest, Labour's demand that the bailed out banks return to lending was never about what was best for the economy or the people. It was to help the country get out of recession before the election, to give Labour a chance of winning, or preventing a Conservative majority.

The Banks are not proping up the Property Markets!

GOOD! It was the major problem with the economy. Let it crash!

As someone who is not only a Lloyds customer but also a shareholder, I am very very happy that Lloyds is following the path it is doing.

If broon hadnt twisted Lllods arm over HBOS and effectivly interfered in a private company by a govt and forced Llloyds shareholders to lose so much then its unlikely Lloyds would have needed bailing out in the first place.

I consider that as an unwarranted and criminal act on behalf of broon and deprived shareholders of value.

As far as im concerned and im sure i speak for many shareholders, the quicker the bank  gets this horrendous marxist govt out of its shareholding the better, and then I fervently hope Lloyds moves its corporate headquarters offshore  and minimises its future tax liability to this stupid inept govt forever, and that way shareholders might get some redress to the massive theft of thier value by broon.

British Bankers' Association here. The economics of banking have changed completely: the easy credit era ended in summer 2007 and the credit crunch. It costs banks more to offer mortgages today than at any point in the last 10 years.

Although the banks still fund their activities using a mix of customer deposits and wholesale money, the proportions have changed: banks are now required to put more customer deposits in the mix. The result of this is that the cost of attracting those deposits from savers (typically two to three per cent over the base rate) now exerts a much greater influence than the Bank of England on the cost of mortgages and loans.

Other significant factors are making borrowing comparatively costly for banks:

no bank can borrow money for free; nor can it borrow money at the current Bank of England base rate (0.5 per cent).  Borrowing from the Bank of England is normally conducted at the base rate plus another one per cent or more, depending on how the Bank sees the risk it is assuming;

nor can all banks can borrow money cheaply on the wholesale money markets. Some banks face much higher rates to reflect the increased risks that they face;

the securitisation market, which enabled banks to convert parts of their mortgage book into attractive financial products for big investors, so providing more cash for new mortgages, has all but dried up. This is due to the knock-on uncertainty about their exposure to US subprime mortgages. The US subprime problem was one of the root causes of the worldwide credit crunch;

British banks are now required to hold more than twice the capital than the international standards require and twice what they were holding before the credit crunch.  Therefore this money cannot be used to support new lending to home buyers and to businesses;in the recession more people are defaulting on their mortgage payments so the lending risk has gone up; and

the banks are also committed to paying bank the money they borrowed from the Government in autumn 2008 under the financial stability package.

Banks are returning to the old business models of the late 20th century, when mortgage borrowers were required to build up deposits, for instance, or offer greater security against the amounts they borrowed. This is because the banks are now required to do this too: they now must hold greater amounts of capital against the amounts they themselves borrow on the wholesale money markets.

To take out a mortgage now is madness, and so is any other debt.