Summing up: Apathy makes it so easy for banks

FACED with apathy more than opposition, is it any wonder that our financial institutions find it so easy to anger their customers?

Take lenders, for example, hitting millions of borrowers with mortgage rate increases in the knowledge that any backlash will be tame at best.

Research earlier this year by unbiased.co.uk revealed that half of all homeowners don’t know how much interest they are paying on their mortgage. A similar proportion said they hadn’t reviewed their mortgage for at least three years.

Such apathy isn’t especially surprising, even when it comes at a cost, and the timing of the survey might have been a factor.

It came before the UK’s biggest lenders started raising the cost of their standard variable rate (SVR) loans. Royal Bank of Scotland and Halifax led the way, and Santander last week revealed that it is to hike its SVR from 4.24 to 4.74 per cent in October.

Santander said its decision was dictated by the increased cost of lending, but the fact is that lenders are raising their SVRs simply because they can.

They are all too aware of the apathy highlighted by the Unbiased survey. They know most borrowers, even faced with higher repayments, will stay put rather than deal with the hassle of taking their business elsewhere, even those with sufficient equity to qualify for a better deal.

To some extent, borrowers – those with plenty of equity in their homes at least – only have themselves to blame for showing so little inclination to take the initiative. One thing for sure is that variable rates – at record lows for much of the past three years – will only become more expensive.

Lenders know when they raise costs that their loan book is highly unlikely to suffer. A few days of hostility and bad headlines is a price well worth paying for increased profit margins.

Price hike shame

EVEN mortgage lenders have nothing on energy suppliers when it comes to whacking up costs without good reason. Scottish & Southern Energy last week told customers they face a 9 per cent increase in gas and electricity prices from October. The rise will add more than £100 to the average dual fuel bill paid by direct debit. Those paying by other methods face even steeper increases.

Just months after suppliers trimmed their prices, we can guarantee that others will follow SSE’s lead soon (with the exception of EON, which froze its prices for 2012). The price hikes will wipe out the reductions of earlier this year – SSE’s change is three times bigger than the cut in its bills last winter.

The same happened in 2008 and 2009, when huge raises were followed by meagre pull-backs when wholesale prices fell. Customers on standard tariffs were hit hardest then, but online bills are now going up more sharply, following pressure on energy suppliers to simplify their tariffs and reduce the gap between standard and online prices. Their response has been 
to raise the cheap online tariffs, which have gone up 
by some 20 per cent in just two years.

There’s still a difference of more than £300 between the cheapest and dearest deals on the market. The onus, therefore, remains on households to take matters into their own hands and, where possible, move to a better deal.

It’s easier said than done in a market that’s complex to navigate. Energy suppliers, like mortgage lenders, know only too well that even as incomes shrink, apathy will reign.