Mortgage Introducer January 2012

News Review: Products

Gloomy prospects encourage longer term rates by

Rob McCoy, senior product and communications manager, PMS

The UK economy is weaker and its fiscal position more precarious than previously thought, according to Gloomy George in his Autumn State- ment. And, we will have to swallow the austerity medi- cine for longer. The Office for Budget Responsibility cut its growth forecasts for 2012 to 0.7% from the 2.5% announced in March. It also revised up its unemployment forecast, from 8.1% to 8.7%. Tax revenues will be lower and welfare payments higher as a result. The OBR is also worried the UK’s growth po- tential has been damaged by the crisis. Together these mean it will take longer to cut the deficit - up to seven years. After Governor King’s dire

warnings over the risks the Euro area pose to the UK, one might expect December’s Monetary Policy Committee meeting to boost quantitative easing further, but I would not be surprised to see the MPC leave policy unchanged. This is not because it does not see downside risks, but rather because it believes the cur- rent pace of cash injection is close to “market capacity”. I think we can expect the

MPC to sanction more QE but I do not expect this to start with £50bn in January, closer to the expiry of the cur- rent £75bn and with greater clarity on Euro area develop- ments. While I see a pivotal role for the European Central Bank

in crisis resolution, both in terms of stimulating growth through monetary policy and accessing its balance sheet, the new Governor of the Eu- ropean Central Bank, Mario Draghi has stressed that the “sequencing” of events is key. The ECB publishes its medium-term forecasts dur- ing December and is likely to mark down growth and infla- tion projections from Sep- tember. This should persuade the Council to cut the “refi” rate for the second successive month.

Rates Last month I mentioned that a number of lenders were in- creasing their rates following increases in LIBOR and the swap rates. This trend contin- ued into early December with both trackers and fixed rate products increasing by be- tween 0.10% and 0.25%. I still believe that the longer term fixed rates provide good value for money. A good example of this is the exclusive deal we launched with the Furness Building Society - 3.85% fixed

“I still believe that the longer term fixed rates provide good value for money”

until 31/03/2017 with a £500 arrangement fee. Last month also saw an interesting 10-year product launched by national Coun- ties Building Society for cus- tomers up to the age of 75. It is only available for 25% LTV and while the offering has at- tracted some criticism due to the steep fees, the fixed rate of 4.19% is attractive for those approaching the final decade of their mortgage or wanting an alternative to a Lifetime Mortgage.

Longer term fixes popular Our product research last month shows us that sales of short-term mainstream prod- ucts – one to three years – are still the popular choice for clients, with 80% of sales dur-

Increase FTB Purchase

Remortgage BTL

BTL Remortgage Total

Direct 1168 1105 1297 106 116

3792 Source: TrigoldCrystal 05.12.11 products Residential Increase

(decrease) on previous

Term 5 years +

0-3 years 2976 3-5 years 1781 928

228 110

Source: TrigoldCrystal 05.12.11 products 10 MORTGAGE InTRODUCER JANUARY 2012

1599 373 298

Increase

(decrease) on previous

296 94 21

634 185 62

BTL Increase

(decrease) on previous

150 -41 2

303 51 25

Increase

(decrease) on previous

Fixed month Tracker month Fixed month Tracker month -7

22 -1 -1

(decrease) on previous month 362 138 434 49 49

Intermediary 2565 3725 3839 959 987

12075

ing november in this product range. We have seen an in- crease in three year sales com- pared to the previous month. The 4-year and 5-year prod- ucts have seen a doubling in take up during november. Whilst 3-year products are growing in popularity, two year deals are still the most popular products with advis- ers and their clients.

Buy-to-let In the buy-to-let market I spoke too soon about Wool- wich, as it succumbed to hav- ing to temporarily withdraw its 75% loan to value products due to servicing issues. Inter- mediaries obviously liked the products and criteria and it highlighted a demand which hopefully others will pick up on. Abbey for Intermediaries’ entry into the market is very welcome indeed. Buy-to-let sales continue to

be evenly split between fixed and tracker products. Dur- ing november we saw the continuing trend, having just over 80% of product sales in the one - three year period.

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 20

154 -26

-119 -119

Total 3733 4830 5136 1065 1103

15867

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