"Offer existing customers same cheap mortgage deals", says UK report

Existing bank and building society borrowers should be offered the same cheap mortgage deals used to lure new customers through the doors, according to a UK government report published today.

The Treasury-backed review, led by David Miles, professor of finance at Imperial College London, is intended to shake up Britain's £775bn (€1134bn) mortgage market by encouraging more borrowers to take up the type of long-term fixed-rate mortgages common in continental Europe and the US.

It calls for Britain's high street mortgage providers to offer more comprehensive information about their products and that advisors should help people assess risk by presenting "what if" scenarios, giving an indication of the scale of variability in interest rates.

In his report Professor Miles said that lenders were using existing mortgage customers to subsidise cut-price deals offered to new borrowers.

"How mortgages are made commercially viable should not rely on price discrimination and cross-subsidisation," Miles said.