News Review: Products


Short-term fixed rates still most popular by


Rob McCoy, senior product and communications manager, PMS


I am sure everyone is now aware that the Monetary Poli- cy Committee left UK rates on hold in May. This is the 27th consecutive month that UK interest rates will have been at 0.5%. This decision to hold came as no real surprise. The recovery has lost momentum over the past six months and inflation worries have eased somewhat as consumers are reacting to the squeeze. Even so, a rate hike will come; it is just a question of timing. The Bank of England’s lat-


est Inflation report said infla- tion is likely to remain above target for longer, fuelling ex- pectations the MPC will act sooner to tackle price rises. Bank governor Mervyn


King used the report to reit- erate Consumer Price Index inflation is likely to rise above 5% this year, with higher than forecast energy prices hitting consumers and pushing up forward projections. Higher CPI increases the pressure on the Bank to raise rates sooner rather than later, though King has cautioned a rise could destabilise the recovery. Al- though inflationary pressures persist, the committee is likely to continue to be swayed by the poor state of household finances and their impact on consumer spending. August now looks the ear-


liest possible date for a rate rise, coincidentally when the next inflation report is due, but weaker short-term pros- pects for economic growth


suggest that the committee may hold off from any tight- ening for the rest of this year. Feedback from a number


of major lenders is also sug- gesting that there will be no rate rise until August and, as I have previously said, the months when the Bank of England inflation reports are issued are key indicators as to when the next base rate rise is due. May has come and gone, August is next in line, fol- lowed by november. This month our research


from member firms is still indicating that the choice of mainstream and prime prod- uct sales has continued to be biased towards the fixed rate products (60%) as opposed to the tracker or discounted products (40%), although this is down slightly on last month. When I look at what firms


were telling us 12 months ago this is a complete shift as we were seeing a split of products of 75:25 in favour of tracker products. Last month’s shift may be influenced by the highlighting of the “Switch &


“Short-term products still are the over- whelming choice for products with over 80% of deals being placed on 2 or 3-year deals”


Fix” style products, with Ab- bey being the latest lender to enter this sector along with some of the television adver- tising from Barclays. Interestingly, one major


lender told us that they are currently seeing a split of their business as high as 80% fixed, 20% tracker. Short-term prod- ucts still are the overwhelm- ing choice for the products with over 80% of deals being placed on 2 or 3-year deals. our research on buy-to-let products maintains a slight


Increase FTB Purchase


Remortgage BTL


BTL Remortgage Total


Direct 872 939


1962 62 72


3907 Source: TrigoldCrystal 04.05.11 products Residential Increase


(decrease) on previous


Term 5 years +


0-3 years 3088 3-5 years 2140 868


1362 415 84


Increase


(decrease) on previous


173 -18


-117


614 262 31


BTL Increase


(decrease) on previous


245 104 0


372 36 33


Increase


(decrease) on previous


Fixed month Tracker month Fixed month Tracker month 696 437 -72


188 7 6


Source: TrigoldCrystal 04.05.11 products 14 MorTgAgE InTrodUCEr JUNE 2011


(decrease) on previous month 2


-1


979 -6 -2


Intermediary 2051 3294 2500 1235 1263


10343


bias towards fixed rates with 60% of their sales being for fixed rate products as op- posed to tracker rate prod- ucts. It is still products of up to 2-year terms that are sold in over 85% of cases. This may be due to the competitive- ness of some of the fixed rate deals currently, with Coventry godiva, The Mortgage Works and BM Solutions leading the way.


Looking back at what the


firms were telling us last May, not a lot seems to have changed with the sales of buy- to- let products as at that time less that 20% of deals were on products with a term longer than two years. At the start of May Mort-


gage Brain reported that fixed rate products saw the biggest increase with 1,026 new prod- ucts (16%) being introduced during the past month. Track- ers bounced back from their first drop in four months with a 6% increase in product availability (167 new products) during April and variable rate products increased by 12% during the past month.


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 323 603


-391 531 523


Total 2923 4233 4462 1297 1335


14250


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