Brokers can help clients beat gloom

While the back pages of the newspapers indicate that Kevin Keegan is starting to think Ron Sandler has the more comfortable of the two hottest seats in Newcastle, the financial press continues to satisfy itself by poking the twitching remains of Northern Rock.

It’s not surprising that NR’s mortgage rates are priced to deflect new business. It seems to be building up its retail funds while running down its mortgage book. But liquidity and funding issues are at the heart of NR’s demise, not the quality of its book.

And the lender has scrapped its innovative Together deal. The product was established in 1999 and worked wonders for many borrowers, particularly first-time buyers.

Many clients were only able to get on the property ladder thanks to Together, with rapid house price inflation offering them safe remortgage options at the end of their deals.

But with a gloomy market outlook the writing was on the wall and the demise of Together became unavoidable after Coventry, Alliance & Leicester and Abbey all withdrew from the high LTV market. BM Solutions followed suit.

The demise of supersize products has also had an effect on 95% and 100% LTV lenders, with Cheltenham & Gloucester making a notable retreat to 90% LTV lending.

It’s clear that the liquidity crisis is now affecting all sectors, not just the sub-prime and specialist ones. In fact the market and the media are now so sensitive to the problems that Nationwide received a lot of attention for deciding to restructure its products into three LTV bandings.

While better rates have been commonplace for those with lower LTVs, the current climate has led to Nationwide being accused of closing the door on first-time buyers.

There’s a need for balance in media coverage. We must try to boost consumer confidence but cannot ignore the fact that the liquidity crisis still has the lending market in its grip. After all, three-month LIBOR is rising, not falling.

A&L’s results have sparked further speculation that it is ripe for a takeover and its rec-ent repricing exercise is consistent with the lender’s intended focus on existing customers rather than new ones.

On a brighter note, the demand for remortgage business remains strong, not necessarily as a result of blind panic but through consumers managing their positions carefully and looking for the best deals to suit their needs.

Brokers are well placed to be part of their clients’ plans in this period by helping them with their searches. Although some lenders are feeling the chill, others such as Abbey still offer attractive rates, providing comfort for borrowers starved of good news.