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True cost of keeping lending wheels oiled

The Bank of England’s base rate cut to just 1.5% is a clear indication that the economy is running out of options.

But who is the rate cut aimed at? Cutting the base rate won’t help the lack of credit – 40% of savings accounts now pay just 1% or less, while 7.5% now offer only 0.1%.

In the mortgage market, while some lenders are passing on the cuts to borrowers, on the whole home buyers aren’t seeing the benefits either. Those on tracker or discount mortgages won’t see a cut below the level of their collars.

If the rate hasn’t benefited savers and has not helped existing mortgage borrowers, how about first-time buyers?

Lenders rates might be low and mortgages cheap compared to six months ago, but 60% of deals require a deposit of 25% or more and those with the most attractive interest rates ask for a 40% deposit.

That’s out of the reach of most first-time buyers. What’s more, while the base rate may be low, LIBOR is much higher and many lenders can’t afford to pass on the rate cuts in full and stay profitable.

It’s a dire situation for brokers too. They want to offer clients the best deals, but with lenders struggling to keep their books profitable, it’s no wonder they are taking their best products direct and cutting proc fees.

The government’s latest scheme is a taxpayer-backed facility to underwrite loans in the hope of oiling the wheels of lending, but at what cost? Is this a well thought out policy with substance or just another blind attempt to lift us out of recession? I fear it’s the latter.


DWP to be grilled over SMI reforms

A House of Lords Committee is set to question the Department for Work and Pensions over changes to the way Support for Mortgage Interest is paid.

A lesson in evolution

The mortgage market experienced a minor earthquake last week. You may not have felt it and it certainly won’t have registered on the Richter scale but PMS’ decision to change what the trading style stands for, from Premier Mortgage Service to Protection, Mortgages & Savings, was seismic in its way.

Prust firm could launch this year

John Prust, former director and founder of Southern Pacific Mortgage Limited, says he hopes to launch a secured loans operation this year if the market improves.

Three catalysts for European equities

By Rob Burnett, Manager of the Neptune European Opportunities Fund In recent weeks, the bear case for European equities has become more pronounced on the back of weaker-than-expected GDP data and deflation concerns. This softening in economic momentum has led some investors to question whether the ECB is behind the curve and indeed whether it […]


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