The Bank of England has cut the base rate by a token 0.25%. This isn’t exciting but it’s a step in the right direction. It will provide a mild feel-good factor for borrowers and won’t arouse the inflationary problems a larger cut could have caused.
I’m no economist so I tend to take a simplistic view of global finance but even I’m certain that a cut of this size will make no difference to the problems the market faces.
They stem from the freeze in the money markets exacerbated by lenders tightening their criteria and reducing their maximum LTVs.
The cash crisis would be bad enough but the reaction of lenders has made it worse and the mortgage industry appears to be approaching meltdown. Thankfully parts of the market are holding up well although they are few and far between.
For example, I attended a meeting held by Halifax recently and we were told by a representative of its premier lending unit, which deals with loans over £300,000, that it has still been busy. Many of its cases are still going to offer within 14 days.
Applicants with good credit ratings interested in low LTV deals can still be fast-tracked and the shortage in mortgage funding hasn’t affected them.
So the rich get richer and can still access the mortgages they want. But the huddled masses of the middle and working classes face difficult battles that many are destined to lose.
These borrowers can be rejected by lenders on the basis of their credit scores without any indication of what went wrong.
This isn’t right. Borrowers should be entitled to the information lenders hold about them and the reasons why their applications fail.
With the Treating Customers Fairly initiative supposedly high on the industry’s agenda, this would be fair for clients and brokers too.
In this climate, how are we supposed to move declined clients onto other lenders without knowing why their applications were rejected in the first place?
HSBC’s price matching deal and other snippets I’ve heard recently seem to point towards lenders trying to squeeze brokers out of the process. When will they start working with us rather than against us?