Victoria has admitted that its introducers are fuming after it hiked rates from 80 to 100 basis points across its pro-duct range last month.
But the sub-prime lender, which distributes only through packagers, has defended the move, saying upward swap rate moves and changes in the se-curitisation markets were to blame.
Alex Forrester, managing di-rector at Victoria, predicts other lenders that securitise will have to follow in its footsteps.
He also believes lenders that securitise will be hardest hit if market conditions weaken, echoing sentiments expressed by Portman group development director Matthew Wyles last week.
Following a Standard & Poor’s re-port warning that the specialist mortgage market would be worst hit by a housing market slump, Wyles warned that sub-prime lenders that securitise – particularly new entrants – would be most vulnerable to a downturn.
But Alan Cleary, managing director of edeus, says: “This view is simplistic. The markets are assuming credit quality will worsen and pricing this in. The last thing we need is someone knocking confidence.”
Forrester says there are factors beyond securitisation that could force sub-prime lenders to reprice.
He says: “We rely on wholesale se-curitisation and swaps to fund our bus-iness. Swaps have now reached 6.1% so sub-prime rates will have to go up by 1% to recoup losses and lenders that don’t have fixed rates will have to introduce them.”
Bradford & Bingley, through specialist lending arm Mortgage Express, and Britannia, through subsidiary Platform, were both named by Standard & Poor’s as in the frame to be worst hit by a housing slump. But both deny they are at risk.
A spokeswoman for Britannia says: “For specialist lenders that are in it for a quick win there is a risk but we are in a more stable position.”
A spokeswoman for Bradford & Bingley says: “Standard & Poor’s recently upgraded our rating which shows the confidence it has in us and the specialist lending markets in which we work.”