Barclays hit as homeowners hunt out deals

SAVVY homeowners have hit profits at Barclays by shopping around for mortgages.

Customers are scrambling to secure a new fixed-rate deal as soon as their old one ends, the bank said.

This reduces the amount of time they spend stuck on an expensive standard-variable rate (Svr). The trend has cut the amount of money Barclays earns in interest from its mortgage borrowers, it said.

It contributed to a fall in profit, which stood at £3.1bn for the first half of 2019, down 15pc on a year earlier.

Tushar Morzaria, finance director, said: ‘We’re seeing customers refinancing their mortgages a lot quicker than we’ve seen historically.’

Banks make more money from Svr customers because their interest payments are normally much higher.

For example, Barclays offers a two-year fix of 1.48pc, which would cost £599 a month for a borrower with a typical £150,000 mortgage.

But when the two years are up, the borrower will flip onto Barclays’ Svr.

This stands at 4.24pc, so the borrower’s costs would jump by £213 to £812 a month.

Banks take much of this increase as profit, meaning the longer a customer stays on an Svr, the more money they make.

If customers switch across to a new fix within days, rather than weeks or months, then banks’ income drops.

Morzaria said that borrowers are flipping over more quickly because online banking makes it much easier and faster to get a deal.

He added that Brexit jitters may also have played a part, perhaps because families are less confident about the future and want to lock in a rate as soon as possible.

Barclays’ shares closed up 1.2pc, or 1.8p, at 155.8p.