Looking for comments on how a bank tax could push up borrowing costs for The Sun

Banks could try to recover some of a higher tax bill through mortgage pricing, but competition would limit how far they could go. A five-percentage-point increase in a tax on profits does not translate into a five-percentage-point increase in mortgage rates. There is no credible basis for putting a precise figure on borrowers’ bills at this stage.

If lenders increased rates on new deals, people approaching the end of a fixed rate would be exposed sooner than those with several years remaining. Borrowers with little room in their monthly budget or fewer alternative lenders would have less flexibility to absorb an increase.

At Bridging Loan Directory, we also look at borrowers planning to repay a bridging loan by refinancing onto a mortgage. If mortgage pricing rises, that exit could become harder to afford or qualify for. The concern is not just a higher monthly payment, but whether the planned mortgage will still provide enough to repay the bridging loan.

Putting a bank’s name on the tax bill does not guarantee its shareholders bear the whole cost. Banks could try to recover some through higher mortgage rates or fees, although competition would limit their room to manoeuvre. Nobody can credibly translate this proposal into a precise increase in mortgage rates.

Borrowers refinancing soon, with tight budgets or fewer lending options, would be particularly exposed.

For landlords, even a small increase can materially weaken cash flow: an extra quarter of a percentage point on a £200,000 interest-only mortgage costs £500 a year. If higher costs discourage investment in rental homes, tenants could also feel the consequences through reduced choice. The Chancellor should assess who ultimately carries the cost before presenting a bank tax as painless for households.

A tax on banks is never just a tax on banks, and borrowers usually end up picking up part of the bill. Taking the surcharge from 3% back to 8% lifts the combined tax on big bank profits to 33%, and lenders will want to protect their own returns. So yes, I do think it could push mortgage rates up, but modestly. Pricing is still driven mainly by swap rates, so we’re talking slightly wider margins rather than a rate shock. The bigger risk is in the small print. Cashback, free valuations and fee-free deals tend to be the first things axed when lenders are squeezed. And it would touch everyone in some way: first-time buyers already stretched on affordability, homeowners remortgaging off older, cheaper fixes, self-employed and complex-income borrowers who rely on specialist lenders, and savers too, since banks can just as easily hold back savings rates. I understand why the Chancellor wants around £2bn a year from the sector, but nobody should kid themselves it all comes out of bank profits.

If you want drivers to stop speeding, raise the penalties. If you want people to stop smoking, raise the tax. Lifting the bank surcharge from 3% to 8% works the same way, except the bill lands on customers, not banks. Lenders treat sector-specific taxes as an operating cost and will recoup it: dearer mortgages, overdrafts, credit cards and business loans, with savers getting less. SMEs get hit hardest. Commercial lending carries a higher risk weight than residential mortgages, so under tax pressure banks cut business lending first to protect capital. The tax raid also dents UK competitiveness, deters inward investment and cools the property market. Then there’s JPMorgan’s £3bn Canary Wharf tower: 265 metres, 3 million sq ft, room for 12,000 staff, and the bank’s flagship European hub. Jamie Dimon has made clear he’ll pull it if Healey presses ahead.

There is always a danger that when you increase the cost of doing business for banks, some of that ultimately finds its way back to customers.
That does not mean mortgage rates would suddenly jump overnight because of one tax change, as pricing is still driven mainly by swap rates, funding costs and competition. But if margins are squeezed, banks may become less aggressive on pricing, reduce lending appetite in some areas or look to recover costs elsewhere.
The borrowers most at risk would be those who already sit at the edges of affordability, particularly first-time buyers, higher loan-to-value borrowers and anyone with more complex circumstances.
The concern is the cumulative effect. If lenders are already battling volatile funding markets, higher regulation and rising costs, another tax burden could make cheap mortgage lending just that little bit harder to deliver.

A higher bank tax could put some upward pressure on borrowing costs, but borrowers should not assume banks will simply add a fixed amount onto every mortgage. Mortgage rates are driven by funding costs, swap rates, competition and how much business each lender wants, as well as tax.

If banks do try to protect their margins, the borrowers most at risk are likely to be those already paying more, such as people with small deposits or more complex circumstances. The frustrating part for borrowers is that even a relatively small increase matters when mortgage payments are already taking such a large chunk of household income.

It could push mortgage rates up, but a higher bank tax doesn't automatically mean a higher mortgage bill. The surcharge is charged on a bank's or building society's profits, as calculated for this tax, above a £100m annual allowance shared across a banking group. Raise the rate and lenders whose profits sit inside that allowance still pay nothing, which could limit how far the bigger ones can pass it on. Those paying it could take lower profits, cut costs or reprice. The tax alone can't tell you how far rates will move. If they do rise, it's new borrowers, people coming off fixed deals and anyone on a rate their lender can change who'd feel it, especially those with tight budgets and few alternatives. Compare the total cost, fees included, before taking your lender's next deal.

It could happen, though how far it goes depends on how much competition there is between lenders at the time. Banks price mortgages off their funding costs and what they need to earn, so a higher tax bill on profits is one of the things that can feed into pricing. In practice we'd expect most of it to be absorbed or spread thinly, because lenders are fighting hard for new business and nobody wants to be the one that moves first. If it does pass through, we'd think in terms of a small rise rather than anything dramatic, and it would probably show up first on the sharpest fixed deals, which are the ones lenders have the least margin to defend.

The people hit hardest are the ones with the least room to move, so first time buyers with small deposits, anyone remortgaging off a cheap fixed rate onto today's pricing, and borrowers who don't fit a standard profile, such as expats, overseas buyers and the self employed, because they already have fewer lenders to choose from.

The government needs to be very careful here. Taxing banks more might sound politically attractive, but banks don't operate as charities, and we shouldn't be surprised if they try to recover some of that cost.

Could mortgage rates increase? Absolutely. But I wouldn't predict a specific rise because mortgage pricing also depends on swap rates, funding costs and competition.

My biggest concern is who ultimately pays the price. First-time buyers with smaller deposits, borrowers approaching remortgage and those already struggling with affordability could be hit hardest.

The irony is that the government could raise billions from banks while making homeownership more expensive for the very people it claims to support.

I'm not suggesting banks shouldn't pay their fair share. But tax policy cannot be judged purely by how much money it raises. We must also consider who ultimately bears the cost.