The CML’s view is that the drop is a result of better retention strategies by lenders. This is being spearheaded by Halifax’s decision to pay a proc fee for retention.
Another reason – and a more pessimistic one – I can think of is that people have released so much equity from their homes there’s nothing left for them to access by remortgaging. If this is true more people will be forced into taking higher rate secured and unsecured loans from sometimes disreputable companies.
But if you have clients who think they’re badly off if they have to get a loan with high interest rates, spare a thought for those who find it difficult to access mainstream credit. Some will have Count Court judgements, others will live in council housing with no security to offer lenders.
I came across a letter from Provident Personal Credit which offers people so-called home credit – something I remember as ‘Provy cheques’ – with an APR of 177%. It justifies this by saying that the rate reflects the fact that it builds in the possibility of defaults for which it generally does not charge extra interest.
Going back to remortgaging, one of the good things that could come out of this is that lenders will realise first-time buyers are still their bread and butter and do more to help them.
Smaller lenders are realising they can gain market share in some niche areas with innovative products, such as the buy-to-share financing option. This means that borrowers can increase the amount they are able to borrow by taking into account income gained by renting out a spare room.
People who use the buy-to-share option will be allowed to add 4,250 to their annual income for the first room rented and 2,125 for the second. The lender involved says this is ideally suited to first-time buyers who are struggling to get onto the property ladder and are happy to share but don’t want to buy with friends.
A look at the small print is in order to see if the borrower has tenants signed up for a minimum period or they could end up in big trouble. But it’s a step in the right direction.