Market watch 10 March 2008

Swaps dropped significantly last week but as we\'ve seen recently, the fate of swap rates doesn\'t affect current pricing.

  • One-year money is down 0.06% at 5.33%
  • Two-year money is down 0.19% at 4.9%
  • Three-year money is down 0.23% at 4.87%
  • Five-year money is down 0.23% at 4.93%

With three-month Libor at 5.76% there’s more liquidity trouble ahead. No-one expects the base rate to go up by 0.5% in the next three months but banks are getting nervous about lending to each other again.

It was great to see Accord Mortgages inform brokers by email that its turnaround times were suffering due to high demand. Despite this, its standard cases are still being offered in eight days and its average time-to-offer for other cases is 11 days.

It’s great when lenders communicate and I wish others would follow Accord’s lead.

Is it me or are Abbey’s rates much better than the competition’s?

Last week I was critical of its communications but most of the brokers I’ve spoken to say they would rather have a vague heads-up than no notice at all. I’m sorry Abbey.

I’ve lost count of the number of lenders repricing this week, mostly without much notice. This is a sad state of affairs but I appreciate that if they give more notice they can’t cope with the resulting demand.

Cheltenham & Gloucester’s withdrawal of its 95% LTV range made me nervous. I can understand why it did it – it’s busy and has lots of applications flooding in. In an environment where funding is constrained you’d expect lenders to concentrate on less risky lower LTV lending. Why tie up your balance sheet with high LTV mortgages when the UK economy faces difficulties and pundits predict that house prices will fall?

The problem with this attitude is that if every lender follows suit, as they did with 100%-plus LTV mortgages, first-time buyers will be priced out of the market. If this happens, who’s going to buy property from clients who want to move up the housing ladder?

This would be good news for landlords but I don’t think they could cope with the demand so house prices would suffer considerably.

The housing market is a cornerstone of the UK economy and by scrapping high LTV deals lenders will bring greater problems on themselves and the rest of the market. They must talk to each other and agree a way forward, otherwise we’ll all suffer. Here endeth the lesson.

With the first of this year’s deadlines for the Financial Services Authority’s Treating Customers Fairly initiative looming at the end of March, there’s never been a better time to join the Association of Mortgage Intermediaries. It has the best website going for directly authorised firms and being an AMI member makes life a lot easier for brokers. There’s a lot of useful material for sole traders too.

Both Bristol & West and Bank of Ireland have reduced their maximum LTVs for new-build flats to 75%.

Their definition of new-build is any property constructed in the past 12 months.

It’s a shame this has happened but it’s a decision The Mortgage Works took a long time ago and I don’t think it regrets it at all.

Well done to Chelsea, which has decided it no longer needs rental figures on buy-to-let cases with LTVs of 80% or below. This is great news. A few lenders such as TMW offer a similar facility but only up to 75% LTV.

I was delighted to see an email from Nationwide with a subject line reading “Nationwide reduces tracker and base mortgage rates from March 1”. But when I read the rest of the email it explained that it was only passing on the recent base rate cut – damn. Finally, Mortgages PLC has withdrawn its self-cert mortgage facility for employed clients.