News Review: Products
No change in UK interest rates – for the 28th month
by Rob McCoy, senior product and communications manager, PMS
The Monetary Policy Com- mittee kept rates at 0.5% and the asset purchase pro- gramme at £200bn in July - did anyone really expect any- thing different? Going forward, the MPC’s
challenge is not getting any easier. Not only is the econ- omy still sluggish, but also, bigger than expected rises in gas and electricity prices will push inflation up even more. So, what we are all asking ourselves, is, when will the base rate change? Back in February, every-
one in the markets, including myself, seemed to be bracing themselves for a rise in May. However, over the past four months, there has been a marked shift in interest rate sentiment in the UK markets. At the time of writing, the markets expect the UK Bank Rate to remain unchanged until mid-2012, with little increase expected thereafter. Minutes from June’s MPC meeting showed a Commit- tee reticent to tighten policy in the midst of an economic ‘soft patch’. The Committee separately questioned levels of spare capacity, suggesting fading confidence in the de- gree of deflationary pressure inherent in the economy. This is important with inflation expected to top 5% over the coming months. Now, depending on which
lender you speak to, predic- tions of when the rate will change varies from November
2011 to the second quarter of 2012. Lloyds Banking Group suggests the former, with a gradual tightening cycle that is expected to take rates to 2% by the end of 2012 and to 3% by the end of 2013. However, Royal Bank of Scotland pre- dicts that interest rates will stay where they are for at least another six months, and Bar- clays suggests that interest rates will remain static until the second quarter of 2012.
Available products The number of mortgage products available to UK mortgage intermediaries has increased for the seventh month in a row, according to figures from Mortgage Brain. This is also reflected in the Trigold data in the table be- low. Another piece of good news for intermediaries is that the number of direct deals has fallen since last month. According to Trigold’s figures, intermediary prod- ucts increased by 12% com- pared to last month, and di- rect deals fell by 9% over the same period.
our research has also
shown that 80% of the appli- cations in June were on these short-term deals. According to the Trigold data, 60% of the products were in the 0-3 year space. This research indicates that lenders are driving cli- ents and advisers towards these deals. With the market still heav-
ily biased towards short-term products, and given what we are seeing with interest rate expectations, are these really the most appropriate prod- ucts for clients? i’m sure that there are genuine reasons for taking these products in most cases, but should advis- ers not be highlighting the market expectations, and also pointing out the value of the longer term products? if, as we expect, rates are indeed higher in two years time, the pain now may be offset by the gain later.
Encouraging signs in the last few weeks we have seen some great 5 year deals launched by Nationwide, Ac- cord and Northern Rock at
Increase FTB Purchase
Remortgage BTL
BTL Remortgage Total
Direct 729 705 790 46 48
2318 Source: TrigoldCrystal 01.07.11 products Residential Increase Term 5 years + Fixed
0-3 years 2924 3-5 years 1493 755
(decrease) on previous month 1223 359 145
Source: TrigoldCrystal 01.07.11 products 12 MoRTGAGe iNTRodUCeR AUGUST 2011
Tracker 1230 319 145
Increase
(decrease) on previous month 722 146 61
Fixed 654 265 51
BTL Increase
(decrease) on previous
month Tracker 196 121 5
407 36 36
Increase
(decrease) on previous month 205 6 6
(decrease) on previous month -59 -57 -50 -24 -32
Intermediary 2236 3480 3703 1364 1390
12173
rates below 4%. ipswich is the latest to have launched a “Switch & Fix” facility on a tracker product. it is also worth considering that, ac- cording to the Council of Mortgage Lenders, some £7.2bn worth of mortgages will be rolling off 5 year fixed rates in the market this sum- mer. on top of these new deals.
we are also seeing higher loan to value limits, with Kensing- ton being the latest to offer 90% products across its range. other encouraging signs are that lenders are looking at being innovative with their products as well as improv- ing their criteria. Take the Saffron Building Society for example - it has launched a product that looks at the applicant’s rental his- tory as an affordability guide. Moreover, The Mortgage Works will now consider new build properties, whilst Clydesdale Bank and Cam- bridge Building Society have launched some deals with builders with higher loan-to- values.
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 113 55 57
555 549
Total 2965 4185 4493 1410 1438
14491
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