Market Watch 21 April 2008

Swaps had a mixed week but rates went in one direction and that was up.

  • One-year money is up 0.05% at 5.43%
  • Two-year money is down 0.07% at 5.02%
  • Three-year money is down 0.10% at 4.94%
  • Five-year money is down 0.08% at 4.96%

It was good to see inflation hold at 2.5% as some experts predicted an increase. The fact that most lenders hiked their rates was less welcome, with increases a daily occurrence.

Chancellor Alistair Darling had the cheek to call on lenders to pass the recent 0.25% base rate reduction onto borrowers although nationalised bank Northern Rock hasn’t cut its SVR. NR passed on just 0.1% of February’s rate cut and 0.15% of December’s. The chancellor should practise what he preaches.

I’m not sure what Prime Minister Gordon Brownthought he’d achieve by visiting the US last week. It was pointless.

The heads of US banks aren’t going to change course just because of a chat with Brown.

Maybe he is trying to raise his profile so he can earn as much as old rival Tony Blair does on the speech-making circuit.

But we need the PM here working hard, not racking up air miles.

It was interesting to see Nationwide reprice its range upwards on the afternoon of the base rate cut. That generated good headlines.

All HBOS brands have followed suit. I don’t know if there have been any radical changes but I expect they’ve made incremental modifications like everyone else.

There’s a danger that new product rates will soon exceed lenders’ SVRs and this would be bad news for everyone. Brokers would suffer because the remortgage market would die out. And it would be bad for lenders too because they have models to help them work out how many borrowers are going to remortgage away. If no-one remortgages their treasury predictions are going to be wrong. Let’s hope this doesn’t happen.

Lenders are as nervous about rates going up as we are. They own swathes of properties and are acutely aware that if rates continue to spiral houses prices will fall further. Obviously they don’t want the value of their properties to plummet because this would cause further problems for the market. Lenders don’t like losses.

While most brokers probably wouldn’t agree, HSBC’s Rate Matcher scheme is good for the industry as it will mean other lenders’ remortgage levels slow down. This should help them to maintain their service levels and ensure their rates don’t rise too quickly.

There are lots of NR remortgages coming up and the government is keen for them to be taken on by other lenders. Sadly the lending sector has its hands full right now.

We’ve seen endless rate hikes and criteria changes. The lowlight was Accord Mortgages giving brokers 75 minutes’ notice of a product withdrawal a week last Friday.

This was an odd day to act as most lenders were attending the Council of Mortgage Lenders’ annual lunch.

Our friends at Cheltenham & Gloucester kept us busy on Wednesday with two notification emails.

The first regarded changes to its remortgage policy.

Henceforth clients must own pro- perties for at least six months to be eligible to apply.

C&G has also introduced an additional form for buy-to-let applications and on buy-to-let cases over 70% LTV it will now ask surveyors to confirm rentals. And just before close of play the lender announced it was changing the rates on its small and large loans.

Abbey has changed its maximum LTV for loans between 550,000 and 1m to 85%. For loans over 1m its maximum LTV is now 75% and for interest-only cases with or without repayment vehicles the LTV ceiling is 85%.