News Review: Products
Lenders will have to hold more capital, affecting prices
by Rob McCoy, senior product and communications manager, PMS
January doesn’t usually hold many high points in the McCoy household. 2011 didn’t look like it would be any different what with the snow, Birmingham Council bin-men not collecting my rubbish for four weeks and the crush in January sales. VAT increasing and other tax duties starting to bite has also marred the start of the year. However, by the time of
writing this I am pleased to say things do seem to have picked up – England bashing the Aussies and winning the Ashes 3 -1, Birmingham City stealing a last minute winner at Blackpool and seeing Aston Villa in the bottom three of the Barclays Premiership – things are on the up. In the mortgage market
too, there seems to be an air of optimism. In the world of mortgage products our feedback from member firms indicated that the choice of product sales was beginning to tilt towards the fixed rate products (60%) as opposed to tracker or discounted products (40%). The actual product mix seems to be tilted towards two year deals as opposed to longer term products. Where clients are taking a tracker product the two year products are still the popular choice in approximately 60% of cases. The responses we have had
from brokers also suggest an increase in remortgage cases with one lender reporting a
jump of 40%. Looking closely it is clear to see that this is not just clients coming to the end of their current deals but those who have been sitting on the standard variable rates or revert to rates for a while. Barclays said recently that they estimate that there are still up to 800,000 borrowers who are sitting on lenders’ standard variable rates. January saw natWest
launch a couple of new 90% deals, and Woolwich also increased the loan to value on its “great Escape Trackers” up to 85%. on another note, our
research on buy-to-let products showed a balanced split in popularity between fixed rate mortgages and trackers with each type accounting for 50%. There also seems to be no change when looking at the term of products being recommended, with the overwhelming choice still for
two year products or even less. Appetite for buy-to-let
lending seems to be growing amongst lenders. Coventry Intermediaries launched two new buy-to-let products with no arrangement fees. The first deal is a 4.99% 5-year fixed rate with a 50% LTV. The second deal is a 5.39% 5-year fixed rate with a 65% LTV. It is likely that these deals will be snapped up as they are unlikely to be around for long. With the start of the new
Year, this is an ideal time for people to take a step back and review what rate they are on and, if need be, take action now to cut the cost of their monthly mortgage payments. Anybody delaying the decision to jump from standard variable rate is running the risk that they may not only continue to pay much more than they need to this year, but they may even struggle to remortgage
to another deal during 2011. This will be due to a number of market factors including the prediction that the base rate will remain at 0.50% for the majority of 2011 and the next change will be up. other factors include house prices which are currently falling and driving on recessionary fears along with a lack of mortgage funding. The Mortgage Market
review is creating uncertainty and lending ‘restraint’ in targeted areas while spending cuts are likely to hit the regions. This could impact unemployment and the House Price Index. Therefore lenders are going to have to hold yet more capital which could have a knock on effect and impact on the price and availability of products, particularly at higher LTVs and their liquidity is likely to be at an all time low given the Special Liquidity Scheme repayment requirements.
The product information below was the number of products as displayed on TrigoldCrystal’s prospector system and includes any broker exclusives via distributors/networks as well as direct products from those lenders who supply them to TrigoldCrystal.
(decrease) on previous
FTB Purchase
Remortgage BTL
BTL Remortgage Total
Direct 856
1701 887 68 78
3590 Source: TrigoldCrystal 02/01/11 products
(decrease) on previous
Term 5 years + Fixed month
0-3 years 1487 -1139 3-5 years 1105 629
-678 -421
Source: TrigoldCrystal 02/01/11products 14 MorTgAgE InTroduCEr FEBRUARY 2011
Tracker 933 505 370
Increase
(decrease) on previous
month -708 -314 -175
Fixed 283 123 42
Increase
(decrease) on previous
month Tracker 34 19 11
189 63 43
Increase
(decrease) on previous
month 19 13 6
Increase
month -7
768 -2
15 15
Intermediary 1874
5190 2999 633 692
11388 Increase
(decrease) on previous
month 21
2354 4
25 29
Total 2730
6891 3886 701 770
14978 Increase
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