Things should begin to calm soon, while Coventry’s 10-year fix at 2.39 per cent is a watershed for longer-term fixes
I cannot bring myself to go on about Brexit too much after last week’s rant but suffice to say that in a crisis we need cool heads.
Step forward Bank of England governor Mark Carney, who has done more than our so-called leaders to calm things down and show that someone, at least, has a plan to execute.
Markets are pricing in a 78 per cent chance of a rate cut in the coming weeks. The BoE has also moved to relax the capital requirements for banks. This could mean up to £150bn is freed up for lending, which will be a big boost.
It will be interesting to watch what happens when rates are cut. Lenders may not want to pass on falls directly because margins are already squeezed. Watch out for the small print on tracker collars, and where the lender’s bank base rate is not the BoE base rate.
There have been some worrying signs, in particular the suspension of several property funds, and the benchmark three-month sterling Libor-OIS spread has widened to 33 basis points, its highest since August 2012. That said, we are not in the same position as a few years ago and I actually believe things will begin to calm pretty soon.
In the markets, three-month Libor has slipped further to 0.52 per cent while swap rates have continued their slide. Ten-year money is now below 1 per cent.
- 2-year money is down 0.07% at 0.51%
- 3-year money is down 0.05% at 0.53%
- 5-year money is down 0.08% at 0.59%
- 10-year money is down 0.14% at 0.89%
In the mortgage market it has been all about the 10-year fix, with a handful of lenders introducing some outstanding long-term deals.
HSBC kicked things off with a 2.79 per cent product up to 70 per cent LTV and a version up to 80 per cent LTV at 2.99 per cent with no product fee.
Smashing the doors down, however, Coventry has an astonishing 2.39 per cent 10-year fix, albeit at 50 per cent LTV. It has a fee of £999 although there is a fee-free option at 2.69 per cent and penalties that reduce to 1 per cent in the last five years. A 10-year fix at 2.39 per cent is a watershed for these longer-term fixes and ushers in a new battleground for lenders.
So far, such fixes have struggled to capture borrowers’ imagination. However, in these uncertain times and with rates falling so dramatically, we will undoubtedly see more opt for the additional security a longer-term fix can bring.
Meanwhile, Metro Bank has gone change crazy. It has reduced rates on its five-year fixes and now has 60 per cent LTV products from 2.09 per cent and 85 per cent LTV rates at 2.59 per cent.
On buy-to-let it has products from 3.19 per cent at 65 per cent LTV on a five-year fix.
Metro Bank will also now do joint mortgages and sole proprietor on buy-to-let mortgages. It has increased its maximum age on residential mortgages to 80 and will consider applicants on Tier 2 visas to 75 per cent LTV with a minimum income of £75,000.
Elsewhere, Halifax has 90 per cent LTV products for homemovers from 2.69 per cent with a £1,499 fee and has tweaked up first-time buyer and remortgage tracker products by 0.2 per cent.
BM Solutions has followed suit on tracker products, no doubt preparing for Bank base rate cuts as lenders will be loath to cut their margins further.
Barclays has cut rates on its lower-LTV range, with its two-year fix at 60 per cent LTV for remortgages now at 1.35 per cent. It has a new five-year fix at 2.14 per cent and a 10-year fix at 2.79 per cent, also at 60 per cent LTV.
On foreign currency mortgages, Santander has confirmed that for applications where any element of employed income is paid in foreign currencies it will use the average exchange rates prior to the Leave vote rather than those on the day of the calculation. It has also raised some tracker products and has a new 85 per cent LTV tracker at 1.84 per cent with a £995 fee.
Skipton has new intermediary exclusives from 1.99 per cent fixed for three years to 60 per cent LTV with a £175 cashback. At 75 per cent LTV the rate is 2.17 per cent with a £500 cashback.
In buy-to-let, Precise has a 10-year fix at 3.99 per cent while Fleet now allows gifted deposits if from an immediate family member. Flats no longer must be situated in a city centre and it will lend only 60 per cent LTV up to £2m.
Andrew Montlake is director at Coreco Group