But lenders are businesses too of course, so some of their decisions have less to do with complex economics or the cost of funds than what the business needs.
Swaps fell last week and LIBOR also eased off. Three-month LIBOR is down at 1.06%.
1-year money is down 0.05% at 0.99%
2-year money is down 0.05% at 1.24%
3-year money is down 0.05% at 1.30%
5-year money is down 0.07% at 1.55%
If you compare these rates since the beginning of the year, LIBOR has fallen, as has every measure of swap rates above, yet we are still seeing lenders increasing rates.
There are clearly other forces at work. As the Grey-Haired Underwriter recently wrote on Mortgage Strategy Online: “The cost of funds for lenders is not the Bank base rate and hasn’t been for years. A small society raises retail funds at about 2.5% and must invest 25% of those in government stock at 0.5%. We lose 2% on 25% of every piece of savings we get.”
Meanwhile, there were a couple of high profile changes last week, with Halifax clearly paving the way for future increases in its SVR by amending the cap on it from 3% to 3.75% above base. This will affect some 40,000 borrowers.
This is of course disappointing and will be a worry to many borrowers who would struggle to remortgage given the stricter controls in the market.
For some, low interest rates are essential to meet their monthly payments and raising rates too early could cause problems. Halifax will probably align its rates around 3.99% over the next few months.
As a broker you could argue that this may at least give the remortgage market a kick.
We have also seen Accord Mortgages suspend all products again for a few days to maintain service and process the number of applications it is getting. This is a brave decision, communicated well, and is probably a better idea than raising rates to an unrealistic level.
It’s good to see ING Direct come back into play with many reduced rates. The pricing is still slightly off, but it’s a good start.
It was a shame to see Skipton Building Society hike rates on its handy 95% LTV products, which are now over the 6% level.
We are seeing demand for penalty-free trackers and offsets, with Coventry’s flexible rate at 2.99% with a free valuation looking good and Clydesdale’s discounted offset product at 3.19% also enticing with no penalties.
Also Woolwich still has competitive offsets starting at 2.99% up to 70% LTV with low penalties.
Finally, The Mortgage Works has launched a handy little buy-to-let affordability app which can be used on your iPhone or iPad.
Heroes & Villains
Hero of the week
Two winners at the Mortgage Strategy Awards deserve a mention. Rob Jupp won Personality of the Year and Vic Jannels won for lifetime achievement – both have been heroes of mine for many a year.
Villain of the week
All those involved with the euro debacle. The Greece scenario is undoubtedly complex but indecisiveness and poor politics is dragging this on, which is of no benefit to anyone, certainly not the Greeks, and this affects us all.