PRESSURE is mounting on banks to justify why Islanders are paying “a Jersey premium” on their mortgages compared to UK homeowners – as lenders in the mainland engage in a rate-cutting war to compete for new business.
Assistant Chief Minister Elaine Millar, who has political responsibility for financial services, has said the government is in discussions with banks “to encourage them to be as competitive as possible”, while Housing Minister David Warr has also urged lenders to lower their rates.
Research using data sourced by financial services firm Integritas Wealth Partners, an investment business authorised and regulated by the Jersey Financial Services Commission, showed that an Islander with a 25-year, £300,000 mortgage – on a two-year fixed-rate – would be paying around £200 more each month with HSBC locally than if they were doing so with HSBC UK.
Using the same comparison, Islanders would also be paying around £380 more and £260 more with Santander and Lloyds respectively than they would be with the banks’ UK counterparts.
Several major banks in the mainland have also been cutting rates to drum up new business, with the UK’s biggest mortgage lender, Halifax, introducing reductions up to 0.83 percentage points – including cutting its two-year fixed-rate remortgage from 5.64% to 4.81%.
This means someone taking up the new rate on a £200,000 25-year mortgage could be saving more than £1,000 a year on their repayments.
Leeds Building Society, HSBC UK, Barlays and Santander are also among the lenders to have announced cuts on their products at the start of 2024, giving homeowners a glimmer of hope after the Bank of England maintained interest rate levels, following 14 hikes in two years in a bid to stem rampant inflation.
However, mortgage adviser Peter Seymour has said this does not mean banks in the Island will follow suit.
Jersey Consumer Council chair Carl Walker said that the situation was another example of Islanders paying “a Jersey premium” and questioned whether regulators could “investigate” the difference.
“Even if they don’t find anything unusual, they could at least reassure Islanders that they are being treated fairly,” he explained.
“Now that interest rates have climbed so high and people are desperately waiting for them to come back down again, it’s brought the matter back into the spotlight.
“It’s only fair to question lenders as to why, when their lending rates are ultimately based on the Bank of England base rate, they are charging their customers in Jersey so much more than their customers in the UK.”
Deputy Warr said he would “absolutely” urge lenders to follow their UK counterparts and drop their rates where possible.
“Whether there is a negotiation to be had with the banks – who knows?
“I am very keen to get to the bottom of what’s going on.”
And Chief Minister Kristina Moore said the government needed to look at “all aspects” of rising costs, including mortgages.
“We are fortunate to have good relations with the leaders of our industries in the Island and the beauty of being in a small community is that it is quite easy to convene discussion and to approach topics as and when required.
“I’ll be pleased to do that, if it’s something that Islanders want, even if it’s just to ask the question – it would be right to do so.”
Deputy Millar said: “Government is aware of the differences between the mortgage markets in the UK and Jersey.
“As with many things, Jersey is a separate market and will therefore, at times, offer different products including mortgage rates. We are in discussions with the banks to encourage them to be as competitive as possible.”
The JEP contacted several banks for this report, but either received “no comment” responses or had not received a reply by the time we went to print.
