News Review: Products
Medium term rates getting more popular by
Rob McCoy, senior product and communications manager, Sesame Bankhall Group
A new year but the same pol- icy - for now. The Monetary Policy Committee voted to maintain its asset purchases through quantitative easing at £275bn and left the bank rate on hold at 0.5%. The MPC noted in December that market capacity would make it difficult to increase the monthly rate of gilt purchas- es substantially above what is already underway, so an increase in QE was consid- ered unlikely. And with busi- ness surveys suggesting the economic environment was better than expected at the end of 2011, the ‘no change’ decision was probably unani- mous.
Ease please The feedback from the ma- jor lenders is that 2012 is unlikely to see any change in the base rate and some even going as far to say mid to end of 2013. I would still expect to see further QE be- fore too long and have put my money on another £50bn for February, when the current programme of gilt purchases ends. However the MPC may for example prefer to hold fire on further QE until clear- er evidence of a meaningful decline in CPI inflation and the quarterly Bank of Eng- land Inflation report, due in February.
Europe
The European Central Bank opted to keep rates on hold
at 1% at its first meeting of 2012 after consecutive 25bps cuts in the last two months of 2011. President Mario Draghi held back on further stimu- lus for the time being after providing €489bn in 3-year loans to the region’s banks in December. The objective of the funding is to guarantee liquidity to a strained finan- cial system. But banks have initially hoarded these funds, increasing their deposits at the ECB rather than using them to buy sovereign bonds or increase lending within the economy. This is not the positive outcome hoped for, but somewhat understand- able given the current fragil- ity of the banking sector and the uncertain outlook for the Eurozone.
Rates rising
2012 seems to have contin- ued where 2011 finished,
with some lenders increasing rates as their cost of funding increased. A pleasing sign to the start of the year is that a number of lenders have in- creased the loan to value lim- its on their ranges. January saw Aldermore increase its LTV limits to 80% on buy-to- let products, closely followed by Leeds Building Society. Accord Mortgages launched some 90% products in its mainstream range and is also now extending the buy-to-let range to the whole of Eng- land and Wales, albeit via cer- tain distributors only. Our product research last month shows us that sales of short-term mainstream products – one to three years – are still the popular choice for clients, with 75% of sales during December in this product range. This is down on the previous month from 80%. December also saw the
second highest month for 5-year products with 10% of the sales being in this range. Overall last month again saw 2-year fixed rate deals as the most popular products with advisers and their clients. The split between fixed rates and tracker or discounted rates has shifted slightly to 60/40 from a previous split of 50/50.
Buy-to-let
Buy-to-let sales continue to be evenly split between fixed and tracker products. Dur- ing December we saw the continuing trend, with 80% of product sales in the 1-year to 3-year year period. That said we did see a four fold in- crease in 1-year product sales. The Mortgage Works, Coven- try Building Society and BM Solutions 1-year products all seem popular choices for brokers and their clients.
The product information below was the number of products as displayed on Trigold Crystal’s prospector system and includes any broker exclusives via distributors/networks as well as direct products from those lenders who supply them to Trigold Crystal.
Direct FTB Purchase
Remortgage BTL
1078 1023 1184 101
BTL Remortgage 111 Total 3497
Residential Term
0-3 years 3-5 years 5 years +
12 MORTGAGE INTRODUCER FEBRUARY 2012 Fixed
1393 829 445
Increase (decrease) on previous month
-1583 -952 -483
Source: TrigoldCrystal 04.01.12 products
www.mortgageintroducer.com Tracker
381 214 164
Increase (decrease) on previous month
-1218 -159 -134
Increase (decrease) on previous month
-90 -82
-113 -5 -5
Intermediary
2413 3587 3708 928 957
11593 BTL Fixed
454 109 63
Increase (decrease) on previous month
-180 -76 1
Tracker
322 53 26
Increase (decrease) on previous month
19 2 1
Increase (decrease) on previous month
-152 -138 -131 -31 -30
Total
3491 4610 4892 1029 1068
15090
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