[cubes]

Not exactly PO related but...

When the base rate (or whatever it's called in the states) goes up... why does my mortgage rate (if it's not fixed) go up as well?

Thanks

[rwwff]

Because thats what the mortgage contract that you signed says its supposed to do.

[cubes]

But it doesn't. It changes whenever the bank feels like it...

I was just wondering why it happens that way. Do the banks have increased costs when it happens? Or are they just trying to make a few more pounds out of me?

[rwwff]

Ok.. short answer not good enough. Its a balance between administrative cost vs increased interest yield.

Your loan contract, (which I've not read), probably says something to the effect that your interest rate is to be not more than x% + prime as published in some newspaper on some page (or a maximum over a set period). It may say something about when your payments are to be adjusted to match the new rates. It may say the bank can change the effective rate at will as long as it is less than or equal to x% + prime.

I doubt your bank has violated your mortgage contract. If they have, you really can sue them and win.

The basic fact is that no one can answer your question authoritatively without spending an hour or three reading your loan contract; we can only guess as to what is in there.

[cubes]

I don't want to sue the bank. I just want to know why loan rates go up in general - I was using my mortgage as an example.

[americandream]

To use a wholesale/retail analogy, the base rate is the wholesale cost to the high street banks for BOE debt funding. Your mortagage is the retail cost you bear to your high street bank for access to that funding (think of your bank as the retailer between you and the BOE)...the rates in other words are a cost for use of money, wholesaled and then retailed. Hope that makes sense.

[cubes]

Ok, thanks. Makes enough sense for me to find more info

[Tanada]

$this->bbcode_second_pass_quote('cubes', 'I') don't want to sue the bank. I just want to know why loan rates go up in general - I was using my mortgage as an example.