The Great British Mortgage Scam!

Our exclusive research reveals that lenders have taken homeowners for a ride by bumping up their margins during the housing boom.

The UK's largest mortgage lender has been taking millions of homeowners for a ride this century -- and we have the evidence to prove it. What's more, we believe that many other lenders have followed the biggest player's lead.

Our exclusive research has revealed that building-society-turned-bank Halifax has taken advantage of historically low interest rates by bumping up its margins to extremely attractive (and near-record) levels. In other words, it (and other lenders) have secretly cashed in on the low Bank base rate in a sly ruse to make record profits for shareholders.

In order to demonstrate this claim, we gathered and then compared two sets of data going back a dozen years. The first figures come from the Bank of England and show its base rate on the first of January each year. The second set of numbers come from Halifax, and show its bog-standard interest rate for existing mortgage borrowers, known as its standard variable rate (SVR), on the same dates.

Here's what we discovered:

1996 to 1999: not too bad

As you can see, during the housing lull of the mid to late Nineties, Halifax kept its SVR at much lower levels over the Bank of England's base rate. Indeed, in the four years between 1996 and 2000, its SVR was between 1.3125 and 1.45 percentage points above base rate. Put another way, its interest margin over base rate varied from 20% to 23% during this period.

2000 to 2003: getting worse

Now take a look at the next four rows of data, covering 2000 to 2003. As you can see, Halifax made the most of the interest-rate cuts which followed the 9/11 tragedy, bumping up its SVR to 1.74 to 1.75 percentage points over base rate. At the same time, its interest margin rocketed to between 29% and 44%. Not bad, eh?

2004 to 2007: taking the mickey!

After the Bank's base rate dived to a 58-year low in mid-2003, Halifax cashed in big-time. From 2004 onwards, its SVR has been stuck at two percentage points above the base rate, while its interest margin has been maintained at between 40% and 53%. Nice work if you can get it!

So, this exercise proves that the biggest mortgage lender has done very nicely from the booming housing market and low interest rates since the turn of the millennium. And crucially, where Halifax leads, other major mortgage lenders follow: there is little difference between its SVR margins and those achieved by its main rivals.

Furthermore, although these data are just a rough cut or snapshot of interest rates over the past twelve years, the ongoing trend is absolutely clear. When the housing market was in the doldrums, mortgage lenders lived with lower interest margins in order to keep monthly repayments affordable and reduce bad debts. However, in the 'anything goes' housing boom of recent years, mortgage lenders have exploited the low base rate by lifting their interest margins and making record profits at the expense of homeowners.

By the way, it's worth noting that the trend towards higher interest-rate margins affects a substantial proportion of mortgage borrowers -- and not just those paying the full SVR. This is because a large number of mortgage deals are linked to a lender's SVR, including discounted and capped rates. So, what can you do to avoid the great interest-margin rip-off? The simple answer is to opt for a home loan which isn't directly linked to a lender's SVR, such as a tracker or fixed-rate mortgage.

Finally, if you want a magnificent mortgage, we recommend giving The Fool's award-winning, no-fee mortgage service a whirl. It searches the entire market to find you the most appropriate home loan.

More:To Fix Or Not To Fix? | Your Easy Guide To Mortgages

Disclosure: Cliff owns shares in HBOS, parent company of the Halifax.