Market Watch: Stimulus measures looming?

Andrew-Montlake-700.jpg

Stimulus measures are imminent in the UK, allegedly, while Europe looks perilous as the prospect of ‘Quitaly’ emerges

I enjoyed an article in The Times last week with the headline: ‘Trust experts on anything but the future’. How true.

It never ceases to amaze me how much stock some people place on others basically guessing what will happen.

The past few years have been littered with such predictions but, as the article says, “economic experts are looking a bit less than the full Nostradamus”.

Indeed, it came as some surprise that the latest UK GDP figures showed a growth spurt of 0.6 per cent in the second quarter, led by manufacturing and services. Construction, however, fell.

Meanwhile, we have the ‘nailed-on certainty’ that the Bank of England base rate is about to be cut in the wake of poorer economic news around Brexit, which has started to filter through.

Even MPC member Martin Weale, who recently questioned whether rates should be cut in August, has changed his tune after the latest PMI survey showed the UK was slumping.

So stimulus measures look like a foregone conclusion.

But, but and but again – we have heard this before. I would be surprised if they did nothing, but also pleased. Inflation will have to be taken into account because the risks of future pressures need to be balanced against helping growth.

Elsewhere, Europe itself is in a pretty perilous state. After the spectres of Grexit and Brexit, the biggest issue looks to be ‘Quitaly’.

This is one to watch: Italian banks continue to struggle and the economy has not been able to do much in the past 20 years. Could a return of the lira be on the horizon?

Meanwhile, in the markets this week, three-month Libor has sneakily slipped to 0.51 per cent while swap rates have once again shimmied down on the back of base rate cut chatter.

Two-year and three-year money are now below the level of Bank base, while five-year money is at a new low.

  • 2-year money is down 0.06% at 0.48%
  • 3-year money is down 0.07% at 0.49%
  • 5-year money is down 0.10% at 0.54%
  • 10-year money is down 0.05% at 0.87%
Graph only

In the lending arena, it was interesting to see Association of Mortgage Intermediaries research suggest that up to one million mortgage prisoners are being neglected by both the FCA and lenders because they do not fall within the remit of the regulator’s review of responsible lending. This is an important issue on which we must continue to battle for the good of consumers and the market as a whole.

Product-wise, Halifax has been busy reducing its rates by up to 0.3 per cent and now has some competitive options across the board backed by the usual good service that we have come to expect. TSB has also enhanced some of its rates across residential and buy-to-let.

NatWest has increased its offering in the Help to Buy and shared equity space, with new deals at 60 per cent and 75 per cent LTV, the latter including a two-year fix at 1.87 per cent. It has also launched more new-build products and cut a range of rates by up to 0.41 per cent.

Skipton Building Society has replaced its free legal fee offer on all Help to Buy remortgage deals with a £500 cashback. This is a much better offer because free legals on anything remotely complex is not a great idea.

Skipton has also reduced selected Help to Buy products by 0.2 per cent.

Nationwide, meanwhile, is being nice to existing clients by offering a £250 cashback to keep their mortgage with it if they move home.

Elsewhere, Furness Building Society has new 90 per cent LTV discounted products, with its two-year version available from 1.99 per cent with a £1,499 fee.

In the buy-to-let world, BM Solutions has cut rates pretty much across the board with five-year fixed rates available from 2.79 per cent with a £1,995 fee. It is a shame this has not extended to product transfer and further advance rates, however.

Finally, in a worrying development, I see the people behind selfcert.co.uk are back with the even worse unemployedloans.co.uk. The whole concept would be laughable if it were not so serious.

Needless to say, offering self-certified loans to people without a job is a recipe for disaster. This is the last thing any of us in the industry want to be associated with and we need to urge borrowers to steer clear of such sites.

heroes

Andrew Montlake is director of Coreco Group