'State owned banks'. Boy do I detest that statement. That's were the 'government', known to you or I as the UK taxpayer, has promised to protect banks who have shown they are clueless in running a business.

Let's remember that Banks are responsible for 79.15% of all complaints upheld by the Ombudsman. (1) Lloyds tops the shop, holding three of the first eleven places. This appalling advice has cost the tax payer dearly in bad advice.

The government's response to this is to protect them, whereas I suspect if they were a less important sector on the 'contribution to UK tax' they would just have been closed as a national embarrassment. The whole purpose of protecting the banks was so that they could begin lending and supporting the business community

The reality is rather different. Base rate has been battered down to 0.5% yet commercial deals are pretty common at 4.5% and 5.5%, a whopping margin for the lender who, by tightening up on lending has created a market where they can also charge excessive fees of c2% for set up and even exit fees. How does all this fit in with the stated objective of loosening lending?

One would assume that no-one at a government level is the slightest bit interested in loosening bank's purse strings; rather they are fully supportive of using the extra cash created above to bolster bank's reserves so they remain solvent. There are varying views on this but if the Bank's contribution to the UK economy is as thought (over 10%) you can see why a country with dwindling manufacturing might want to focus on supporting this brutal sector.But if they are to be supported they need to be given much tighter guidelines to follow.

This comes at a time when the banks who are effectively state owned have been accused of charging mortgage customers considerably more than the banks who have not been bailed out. Lloyds, the company who is pouring our money into adverts to make them look pretty, is once again at the bottom of the pile. If we look at two year fixed rates, a Cheltenham and Gloucester (part owned by Lloyds group) mortgage would cost 4.75%, whereas the average is 4.19%.(2) Halifax (part owned by Lloyds group) was third worst with a rate of 4.27% whereas northern rock, 100% owned by the UK tax payer was second worst with a rate of 4.37%.

This is a massive impact on the unsuspecting mortgagee who should be made fully aware of the potential for saving elsewhere. For a mortgagee with a £150,000 mortgage they will be paying £840 more per year with C&G than the average lender out there.

RBS (84% state owned) buck the trend however, with an average fixed rate deal of 3.84%, or £1365 per year cheaper than C&G, so there can be no excuse for the Lloyd's group's activities.

These same banks have a long hard road ahead of them as they rebuild their finances and reserves but they are rebuilding because of their appalling lending practices, quite extraordinary swashbuckling investment decisions and the poor standard of advice and service they have been offering as reflected in the upheld complaints above.

But after making those shocking decisions they need to remember that the person rebuilding their reserves by paying through the nose for mortgages should not be the people who have bailed them out via tax payers money or via previous advice that has been given by the banks.

Customers should be aware, and they should take advantage of the fact they can shop around to beat the deals offered to them via their existing banks. At £1365, apathy can be expensive. Not being anti-banks, but its difficult to be pro them, as savers are also being battered. They didn’t cause the problem but whilst banks are lending at so far above base rate, their savings rates do not have the same monetary dyslexia with the average easy access rate offering 0.72% and many paying 0%.(3)

If you need independent mortgage advice call Peter McGahan on 0845 230 9876, e-mail info@wwfp.net

Sources:

1) Ombudsman

2) Independent

3) This is Money

Peter McGahan is an Independent Financial Adviser and the Managing Director of Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Services Authority. 'The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'

Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.

The above represents the personal opinions of Peter McGahan.

All information is based on our understanding of current tax practices, which are subject to change

- Peter McGahan is the Managing Director of Worldwide Financial Planning - FT Award winning independent financial advisers based in Cornwall with offices across the UK. Worldwide have won 16 awards from the Financial Times in four years and are highly respected in financial circles as being experts and specialists within their fields. Peter McGahan writes for local and national publications such as the Western Morning News, Cornish Guardian, West Briton, Financial Times, Channel 4, BBC, Tiscali Money, Yahoo Finance and various other media. If you have a financial query and wish to speak to a dedicated adviser, contact Worldwide Financial Planning on 0845 230 9876 or email info@wwfp.net