BRITAIN’s biggest banks have increased their profits from customers by 12 per cent from £3.8 billion to £4.2 billion despite the financial crisis, their latest results reveal.

Big losses arising from the credit crunch made the headlines last week, but the small print of the banks’ half-year reports shows they are clawing back profits from British consumers by charging the highest margins on mortgages in years.

Borrowers are now paying thousands of pounds more for loans from HSBC, HBOS, Lloyds TSB, Barclays and Royal Bank of Scotland, even though the cost of funding them in the wholesale market is lower than it was a year ago.

Melanie Bien of Savills Private Finance, a broker, said: “Lenders have been increasing their margins during the credit crunch and there is absolutely no question – mortgages are profitable again. Now, in these results, the big banks are blatantly admitting they are looking to continue improving margins, meaning higher costs for borrowers.”

HSBC, which snared a 6 per cent share of Britain’s mortgage market in the first half of 2008, posted a 28 per cent drop in global profits in its latest results, yet its UK personal-banking division was up 85 per cent to £605m.

Over the past 12 months HSBC has increased the cost of its two-year fix for borrowers with 25 per cent equity in their home by half a percentage point, from 6.34 per cent in July 2007 to 6.84 per cent last month, according to figures from the data firm Defaqto. This amounts to an extra £62 a month on a £200,000 loan, or £1,505 over the two-year period.

Lloyds TSB, which owns Cheltenham & Gloucester, reported a hefty 20 per cent rise in profits from its UK arm to £911m and admitted it was making more money by charging increasingly higher interest rates.

A year ago, C&G was charging an average interest rate of 6.28 per cent on a two-year fixed-rate deal for those with a 25 per cent deposit compared with an average 6.61 per cent in July this year – or £41 a month more.

Royal Bank of Scotland, meanwhile, increased profits from its UK business by 9.2 per cent despite unveiling one of the biggest losses in British corporate history, £691m.

RBS confirmed on Friday that it was making more money from selling mortgages. “Following several years in which we have had a limited appetite for the returns available within the UK mortgage market, we have taken the opportunity during the first half to write good-quality mortgages, improving market share at attractive margins,” it said.

Homeowners are being urged to shop around to make sure they get the best deal. Earlier in the year, it was worth sticking with your existing lender, but with many banks and building societies competing for business it is once again worth scouring the market.

Britannia building society has the best three-year fix for a borrower with a 25 per cent deposit at 5.94 per cent with a fee of £598. Monthly repayments on a £200,000 deal would cost £1,281.

Brokers are increasingly looking to Abbey, which is owned by the Spanish bank Santander, for the best rates on remortgage deals for those with substantial equity in their home.

This week the bank is expected to slash rates again for those looking to remortgage through brokers. Its two-year tracker for people with 40 per cent equity in their home is 5.54 per cent with a £1,999 fee. It also offers a two-year fix at 5.98 per cent with a £995 fee for those who remortgage with 30 per cent equity in their home.

HSBC offers the lowest rate on the market at present – a 4.99 per cent per cent discount mortgage for those with a 20 per cent deposit – but charges a £2,499 arrangement fee.

Banks might not be able to make such good profits for long, analysts suggested.

Jonathan Pierce of Credit Suisse said: “A lot more of the volume is going to the biggest banks – rather than the specialist lenders and building societies – and they are in effect writing the entire net mortgage market at the moment. The reduction in competition, combined with the realisa-tion that previous pricing was unsustain-ably low, means higher margins.

“In the second half of the year, however, mortgage-impairment charges will increase as will unsecured charges. This is going to start translating into higher losses.”

HBOS was the only bank to report a drop in UK retail-banking profits, after drastic rate rises earlier this year to curb its lending. However, following a rights issue which raised £4 billion of new capital, it has cut rates to kick-start lending again.

In its latest results, HBOS acknowledged the “beneficial impact of higher pricing” for mortgages – “notwithstanding the increased cost of both wholesale and retail funding”.

Barclays reported a 7 per cent rise in profits from UK customers to £690m – and said its income from fees alone rose by £56m to £639m. The bank, which owns Woolwich, boosted its share of new mortgages to 26 per cent, compared with 6 per cent the previous year.