As everyone seems to have stolen my thunder and are sending positive vibes around the industry I thought I’d buck the trend and take a more negative stance.
At my firm we were recently debating the rights and wrongs of recommending a fixed rate to a client that was 0.5% more expensive than the lender’s SVR.
We were all of the opinion that interest rates will rise in 2010 but there were wide-ranging views on how much and how fast this would happen.
Everybody was having their say about inflation, the influence of the election and so on, and then someone threw in the curve ball of LTVs.
What influence will LTVs have on the market this year? Will we still see more 85% LTV products when interest rates rise?
It has been widely touted that when interest rates rise house prices will fall as individuals cut their losses and turn their backs on expensive mortgages as a consequence of salary cuts, lack of bonuses and job uncertainty.
In a falling market lenders obviously restrict LTVs to protect their books, thinking that 15% equity should be sufficient to guard against negative equity.
But will lenders really want volumes of 95% LTV deals on their books in 12 months’ time? Having been there, seen it and worn the battered T-shirt I doubt it. So is it best advice to book products for all your high LTV clients now? The debate rages on.