ISLAND lenders have been handed a deadline to explain why their mortgage rates are higher than those in the UK.
Jersey Consumer Council chair Carl Walker this morning sent a letter to mortgage providers requesting a “detailed explanation” justifying the discrepancies and giving them three weeks notice to respond.
Housing Minister Sam Mézec and Treasury Minister Elaine Millar are also “eagerly awaiting” the response from lenders, according to Mr Walker.
However, Assistant Treasury Minister Ian Gorst has acknowledged that Islanders should not necessarily “expect rates and product offerings to align” in both jurisdictions.
The JEP recently reported that Islanders were paying a “Jersey premium” on their mortgages compared to UK homeowners.
Research in January 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.
Meanwhile, banks in the UK were cutting rates to drum up new business.
Mr Walker’s letter to lenders acknowledges that “various factors contribute to the determination of mortgage rates”, including market conditions, regulatory environments, and operational costs.
He continued: “However, in light of the concerns raised by consumers, we are seeking clarification from mortgage providers to better understand the justifications for the observed disparities.”
The “detailed explanation” includes clarification on the factors that influence rates in Jersey, an analysis of competition in mortgage market conditions between Jersey and the UK, and confirmation that they are complying with regulations.
Mr Walker also asked the banks whether they were working to enhance transparency and consumer understanding of mortgage pricing.
In a statement sent to the JEP, Mr Walker said: “The mortgage industry in Jersey seems to be another one of those areas where a Jersey premium is being applied for no rational reason.
“With housing and repayment costs taking up to a third of people’s salary in some cases, it is important to dig deeper into the market and understand better why Islanders are being charged more than their UK counterparts for effectively the same product in a much more financially secure housing market.
“With housing costs being such a huge driver of our local rate of inflation, we have already contacted both the Housing Minister and Treasury Minister, who are eagerly awaiting the responses we receive from the lenders.
“Once we have a better understanding of the local market, we can consider what, if anything, can be done. That could be pressure for more transparency, pressure to open up the market and make it more competitive or exploring any options through the regulatory route.”
Deputy Gorst said that he had discussed the discrepancies with mortgage lenders and that the difference in mortgage rates between UK and Jersey had reduced since the beginning for the year.
Deputy Gorst, who also has delegated responsibility for financial services, said: “We continue to encourage banks in Jersey to be as competitive as possible and to offer Jersey residents a competitive range of mortgage products.
“It is important to recognise, however, that the Jersey mortgage market is separate from the UK mortgage market, and we shouldn’t necessarily expect rates and product offerings to align.”
