News Review: Products


QE2 to drive down longer term mortgage rates by


Rob McCoy, senior product and communications manager, PMS


The release of £75bn of quan- titative easing in October may suggest that the Bank of England is more concerned than ever about the possibility of an event in the eurozone. The protracted eurozone cri- sis, concerns that a default in Greece would cause others to fall and a rolling banking crisis engulfing the UK all weigh heavily on markets and on businesses which are struggling to obtain credit from banks worried about their capital levels – I don’t know about launching QE2 – but perhaps we need Ark Royal 2! The Bank has also changed


its view on domestic growth drivers. Previously, it had in- dicated that the UK’s growth slowdown was due to “tem- porary factors” including the tsunami in Japan and the un- usually large number of bank holidays around the royal wedding. The Bank said: “In the


United Kingdom, the path of output has been affected by a number of temporary factors, but the available indicators suggest that the underlying rate of growth has also moderated. The squeeze on households’ real incomes and the fiscal consolidation are likely to continue to weigh on domes- tic spending, while the strains in bank funding markets may also inhibit the availability of credit to consumers and busi- nesses.”


Cost of living cPI inflation rose to 5.2% in September. The present ele- vated rate of inflation primar- ily reflects the increase in the standard rate of VAT in Janu- ary, the impact of higher en- ergy prices and higher import prices. However, measures of domestically generated infla- tion remain contained, and in- flation is expected to fall back sharply next year as the influ- ence of the factors temporarily raising inflation diminish and downward pressures from un- employment and spare capac- ity persist.


Fixed rates fall Last month saw a number of lenders continue to launch even lower fixed rate products. According to a recent survey by moneySupermarket, the average 2-year fixed rate mort- gage has fallen to a record low of 3.82%. That compares to an average rate of 4.01% in Au- gust and comes after Leeds Building Society launched a 1.99% 2-year fixed rate avail- able up to 70% loan to value, which they claimed to be their


lowest fixed rate in their 136 year history. By the time you are reading this, it will more than likely have been with- drawn as it is only has a small tranche of funding. Lenders have also contin-


ued to offer, in my opinion, some excellent long term fixed rates. nationwide for In- termediaries, northern Rock, Hinkley & Rugby Building Society and others, recently reduced their rates further and we have seen some rates as low as 3.39%. The extra £75bn of quanti-


tative easing should also help drive down some of the longer term fixed rates and not only impact the 7-year or 10-year deals, but also make the 5-year deals more keenly priced. However, this will only hap- pen if the Bank concentrates on the longer end of the gilt market.


Short-term still popular Our research shows us that sales of short-term main- stream products – between one and three years – are still the popular choice for clients


Increase FTB Purchase


Remortgage BTL


BTL Remortgage Total


Direct 920


1055 908 54 64


3001 Source: TrigoldCrystal 05.10.11 products Residential Increase


(decrease) on previous


Term 5 years +


0-3 years 3353 3-5 years 1848 789


1662 625


Source: TrigoldCrystal 05.10.11 products 12 mORTGAGE InTROdUcER NOVEMBER 2011


1343 376 213


Increase


(decrease) on previous


65


-1282 -444


500 218 45


BTL Increase


(decrease) on previous


-34 51 5


348 48 27


Increase


(decrease) on previous


Fixed month Tracker month Fixed month Tracker month 248


96 19 -2


(decrease) on previous month 73 77 53


-10 -10


Intermediary 2452 3665 3769 1162 1192


12240


with 80% of sales during Sep- tember in this product range. However, we have seen a 4% rise in 3-year sales compared to August – the highest level for 2011. This increase seems to have come about as result of a similar reduction in the 5-year plus range. despite this, 2-year fixed rates are still by far the most popular prod- ucts with advisers and their clients.


Buy-to-let Buy-to-let sales continue to be evenly split between fixed and tracker products, but a growing trend we have seen in September is for 1-year and 5-year products. Just over 80% of sales are in the one to three year period, with 1-year prod- uct sales up by nearly 2% com- pared to August, and at their highest level this year. Furthermore, sales of 5-year products saw a threefold increase last month with a number of lenders launching 5-year products in the buy-to- let arena, including coventry’s Godiva mortgages, Skipton Building Society and Leeds.


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 404 472 476 92 92


Total 3372 4720 4677 1216 1256


15241


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