I read that a driver of the mortgage price wars is the "ring fencing" rules put into place earlier this year. I understand that the effect of the ring fence rules is to prohibit big banks from using their retail deposit base to fund non-retail banking activities like investment banking. So apparently what's happened is that at least one big bank, HSBC, has decided to divert their under utilised retail deposits into the UK mortgage market - bringing mortgage rates down.
That’s a very good point. But, in order to try and assess how this phenomenon can affect CYBG’s earnings, one needs to first quantify how meaningful the margin compression on mortgage rates is, and then calculate the likely impact on CYBG’s NIM.
Do you have any verifiable historical information as to how much HSBC (or any other UK lenders) have tightened their UK mortgage rates in the recent past?
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