The mortgage industry’s long run of success is down in good part to consumer confidence plus highly competitive product offerings. To paraphrase Harold Macmillan, the mortgage customer has never had it so good.The range and depth of product lines on offer are truly staggering. Today, more mortgages are being approved via innovative and competitive product ranges. For example, in less than 10 years, the sub-prime market has become a mature force. It is not seen with suspicion as in the early days, but is a respected sector that approves billions in mortgages each year. Clients with unusual or difficult circumstances used often to be turned away. They found obtaining a mortgage at a reasonable rate almost impossible. Not so now. Competition has pushed sub-prime rates down to reflect the lenders’ experience in certain product lines. Good portfolio performance will be a factor in that decision. By the same token, product lines that do not meet arrears and repossession expectations will be priced upward or in some cases, withdrawn completely. One of the most fiercely competitive product areas has been self-certification, in which rates have been under pressure for several years. This has intensified in the past few months with rates falling to new lows. Those lows are not too far off parity with some of the prime rate offerings. They are a subset of the competitive battlefield and lenders’ experience of how their portfolios are performing. With that in mind, is there any room for rates to fall further? Many factors determine the direction of self-cert rates. Some are simply economic, others are market and lender-based. The economy shows signs of dark clouds gathering. Should the news be negative, lenders will scrutinise their portfolios with renewed vigour. But that is around the corner. With competition as it is, who’s to say that if a lender wants to drive for higher market share, even lower rates will not be marketed? A short-term boost it may be, but an effective approach nonetheless. That is simply an already highly competitive market doing what is does best. Whatever the future holds, intermediaries have been successful in marketing self-cert products. This success has been in direct response to the needs of our customers. Self-cert products give them both a flexible mortgage option and the added benefit of excellent value for money. This begs the question, how low can rates really go? I wouldn’t bet against even lower self-cert rates in the next few months – more good news for customers. Simon biddle
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