Manipulation of Interest Rates

Banks and Building societies are apparently taking a leaf out of the ever successful supermarkets, in an attempt to maximise their profit margins in this competitive mortgage market; by adding 0.99% to their mortgage rates.

If you investigate the market place you will discover that the minority of lenders will offer interest rates that are considered a whole figure i.e., 7.00% as opposed to the majority who feel a figure such as 6.99% is sub-consciously far more appealing.

One can equally produce a model to demonstrate which digits maximise profits for banks, when customers round and prune interest rates. The model would demonstrate that lenders maximise their mortgage profits by applying an interest rate that is just below a whole number. For example 3.99% as opposed to 4.00% or 5.95% as opposed to 6.00%.

These shrewd business men know how to appeal to the masses and is the exact same policy that the major supermarkets employ when they offer a product at £9.95 instead of £10.00. The trick is that the majority of people round the figure down and convince themselves that they are getting an amazing deal.

Therefore there can’t be a better argument than: Shop around and locate the best mortgage deal for your needs by investigating as many of the mortgage products as possible.

Navigate around the Re-Mortgage Market website a read as much information as you wish free of charge.

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