News Review: Products


Analysis of the economy, products and interest rates “There was


by Rob McCoy, senior product and communications manager, PMS


Last month i started this article with a forecast from our lenders that the next change in base rate was not likely to be before quarter one 2011. Since penning that article these forecasts have been revised by some of the lenders and they now do not see it being before the end of quarter two 2011. So what has caused the


lenders to review these forecasts? uncertainty over the


prospects for economic growth is affecting interest rate expectations. although no one is


expecting an immediate change in rates or to the asset purchase scheme, there is increasingly fierce debate over where rates should move. on the rate-hiking side, inflation prospects are the major concern, with cPi sticking stubbornly high at 3.2% in June. indeed, some mPc members are concerned that inflation expectations are on the rise. moreover, the uK notched up a surprisingly robust 1.1% q/q growth rate in Q2, which might also suggest that it is time to reduce the pedal-pressure on ultra- simulative monetary policy. i expect rates are likely


to remain on hold for some time yet. there are still ongoing concerns about the strength of the recovery. uK firms have plenty of spare capacity and high rates of


unemployment are holding down domestic demand, while signs of a slowdown in the global recovery suggest exports are unlikely to come to the rescue just yet. indeed, recently governor of the Bank of england, mervyn King, expressed concerns that problems in the world economy threaten the uK’s recovery. Speaking to mPs at the uK treasury Select committee, he said that imbalances in global demand, where the growth prospects of exporter countries rely heavily on spending by deficit ones, remain unresolved. one manifestation of those imbalances is the uK’s continued reliance on consumption, rather than exports, to maintain growth. there is also further


evidence that the uK housing market recovery has run out of steam. the nationwide index finally joined the pack showing price declines, reporting that prices fell by 0.5% between June and July. this takes the annual rate of house price inflation from 8.7% to 6.6%. they cited weak buyer demand as a factor driving prices lower. With these forecasts in


mind the feedback from our latest round of broker research suggesting that tracker rates and short term ones in particular are being recommended to a greater degree than previously. there has been shift in favour of tracker rates and also an increase in using lifetime tracker products. this might be due to some interesting product launches recently. at the start of this year


14 mortgage introducer SEPTEMBER 2010


further evidence that the UK housing market recovery has run out of steam. The Nationwide index finally joined the pack showing price declines, reporting that prices fell by 0.5% between June and July.”


we saw a number of lenders promote a facility call drop lock where clients could switch from their current product on to new fixed rate, nationwide and Scottish Widows Bank to name just two. recently, Woolwich launched the facility on some of their new tracker products. a product carrying a drop lock may be switched to any


FTB Purchase


Remortgage BTL


BTL Remortgage


Direct 597


615 623 53 51


1939 Residential Term


0-3 years 3-5 years 5 years +


Fixed 779


485 271


Tracker Fixed 403


162 86


140 7


23


Woolwich fixed or capped rate product, subject to availability at the time, without incurring the early repayment charge payable on the old product. the switch will be subject to any application fee and rate switch fee applicable to the new product at that time. the new product may also have an early repayment charge which will not have the benefit of the drop lock. Should the client wish to switch during this drop lock period all brokers need to do is to follow the same process as their simple retention process and complete the appropriate rate switch request form. it was also good to see last


month the Skipton return to the market with some competitive products, and with an appetite to lend at 90% LtV, with a tracker rate starting at 4.89% and a flat fee of £695 – looks like a good deal to me. don’t know how long the product will be around for so make hay while the sun shines. in the buy-to-let arena


there were no real surprises with the research showing tracker rates of up to two years to be the popular choice.


Intermediary 1156


1486 1508 320 351


4821 BTL


Tracker 105


17 1


Source: TrigoldCrystal 04/08/10


Total 1753


2101 2131 373 402


6760 Source: TrigoldCrystal 04/08/10 products


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