News Review: Products
No real surprises on the interest rate front
by Rob McCoy, senior product and communications manager, PMS
And so it begins. As expected, the European Central Bank became the first major central bank in the developed world to start the process of mon- etary policy normalisation. The ECB voted to raise the re- financing policy rate to 1.25% last week, up from 1%. Having previously warned
that he would raise rates the ECB president, Jean-Claude Trichet, took the plunge to increase the rate by 25 basis points at the April ECB meet- ing. This is the first hike since July 2008 and inflation, of course, was the reason. The estimate of Eurozone
inflation increased to 2.6% in March, up from 2.4%, prompt- ing the ECB into action in order to anchor inflation ex- pectations and to prevent second round effects of rais- ing wages. The move was not a surprise as it was well sig- nalled last month, but recent developments in Japan and the Middle East added a little suspense before the decision was announced. However back at home in
the UK there was no real sur- prise at the Bank of England’s hold decision. The Monetary Policy Committee voted to keep UK rates steady at 0.5% for the 24th consecutive month at the April meeting. This was due to UK economic conditions still being fragile, especially for households. Real disposable income for
households shrank by 0.8% year-on-year in 2010 and
changes to taxes and benefits also hit pay packets late in April.
Delays likely Looking forward, the shock news that inflation eased in March for the first time since last summer, largely due to grocers cutting food prices, reduced the chance of a Bank of England rate hike in May. This will give the Bank of
England leeway to support the still shaky economy. The unexpected drop in annual inflation to 4.0% from 4.4% in February - together with a sharp decline in retail sales - gives ammunition to the poli- cymakers who want to see the economy on a solid footing before tackling inflation and raising rates. Furthermore, some econo-
mists and commentators are now going so far as to suggest it will be August before we see the first change from the Monetary Policy Committee.
Fixing popular As can be seen in previous months, our research from
member firms is still indicat- ing that the choice of prod- uct sales has continued to be biased towards the fixed rate products, which account for 70% of sales, as opposed to the tracker or discounted products which account for 30%. This is possibly due to the number of these types of products available in the mar- ket. Product terms continue
to be predominately 2-year deals that are proving popu- lar. Where clients are taking a tracker product it is again the 2-year products that remain the popular choice in approxi- mately 60% of cases. our research on buy-to-let
products shows that a bal- anced split continues between fixed rate and tracker rate products with 50% apiece. There also seems to be no change in the term of prod- ucts being recommended with the overwhelming choice still for 2-year products or less. Last month i said that
we were beginning to see an increase in products be- ing launched. This has been
Increase FTB Purchase
Remortgage BTL
BTL Remortgage Total
Direct 870 940 983 68 74
2935 Source: TrigoldCrystal 03/04.11 products Residential Increase Term 5 years + Fixed
0-3 years 2392 3-5 years 1703 940
(decrease) on previous month -552 -226 -154
Source: TrigoldCrystal 03.04.11 products 14 MoRTgAgE inTRodUCER MAY 2011
Tracker 1189 433 201
Increase
(decrease) on previous month -381 -145 -57
Fixed 369 158 31
BTL Increase
(decrease) on previous
month Tracker -35 35 -6
184 29 27
Increase
(decrease) on previous month -33 -24 -23
(decrease) on previous month 31 30 97 14 14
Intermediary 1728 2691 2891 704 740
8754
borne out by data from the Mortgage Brain’s Monthly Product Analysis which has shown that the number of mortgage products available to UK mortgage intermedi- aries has broken the 10,000 mark. The overall product avail-
ability is now at its highest level since back in Septem- ber 2008. Looking at the past 12 months a 123% increase in product availability shows a clear picture of market move- ment and the progress that continues to be made.
NEWS IN BRIEF • Data from the Financial Services Authority show that 69% of mortgage debt is on a variable rate • According to the Council of Mortgage Lenders 750,000 fixed rate mortgages will revert to a variable rate this year • PMS research shows £16 billion of 5-year mortgages will come to the end of their fixed rates during July and August of this year
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.
Increase
(decrease) on previous month -386 -626 -574 -80 -94
Total 2598 3631 3874 772 814
11689
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