Editor’s note: Lenders – time to look at criteria


There have been many times during the past year and a half when experts have predicted the bottom of the market for mortgage rates.

Before last summer, a host of lenders launched five-year fixed rates below 2 per cent because a number of them were behind on their lending targets. This was despite five-year swap rates then being over 25 basis points higher than they are now.

Presently, the lowest five-year fix comes from First Direct, priced at 2.09 per cent up to 60 per cent LTV, followed by HSBC at 2.18 per cent.

But the conditions are in place to enable the return of the sub-2 per cent five-year fix. Not only are five-year swaps at their lowest level in more than two years but the chance of an increase to base rate this year looks slimmer than it was just a few weeks ago.

In fact, some traders reportedly believe there is a 25 per cent chance of the Bank of England cutting the benchmark rate, which is already at a record-low 0.5 per cent.

Add in the fact that competition is strong across the mortgage market and all of the ingredients are in place for rates to fall even further.

However, with the Bank giving out mixed signals as to when the base rate will at last increase, it can be argued that mega-cheap loans will do little to stir borrowers into refinancing.

It has become somewhat of a cliché but lenders would be wise to consider criteria changes in order to scoop up more business.

Smaller lenders have led the way in this respect over the past few years, but it would be a game-changer if one or two of the bigger lenders made some sensible changes to their self-employed and lending-into-retirement criteria.

We could be on the cusp of a mini rate war, but it would be more helpful if lenders were to decide to make criteria the new battleground.