More lenders are offering drop-lock loans but these could catch clients out when they eventually move to a fixed rate. Meanwhile, Abbey is keeping fast-track but with tough requirements for proof of income
Swaps fell slightly. Two and three-year swaps are now at record lows. And three-month LIBOR is up 0.01% at 0.64%
1-year money is unchanged at 0.93%
2-year money is down 0.03% at 1.58%
3-year money is down 0.03% at 2.18%
5-year money is down 0.03% at 3%
Sadly nothing surprises me about this government’s failure to support the housing market. But the fact that its £285m Mortgage Rescue Scheme has helped a mere 276 households since it launched in January 2009 is a disgrace.
Cheltenham & Gloucester has issued a top three list of its mortgages. There is a 3.29% two-year tracker up to 75% LTV and a maximum of £500,000 with a £995 fee. It is available for purchases and remortgages, with freebies for the latter.
There is also a 2.79% two-year tracker for loans up to 60% LTV, with a £995 fee which comes with freebies for remortgages and a maximum loan of £500,000. Another rate is a purchase-only two-year fixed at 6.99% for loans up to 90% and £500,000 with a £995 fee.
On the buy-to-let side there is a 4.7% two-year tracker for loans up to 75% LTV to a maximum of £500,000 with a 2.75% fee. There is also a 4.2% two-year tracker up to 60% LTV, with a 3% fee for purchases and remortgages and the 4.49% two-year tracker for remortgages only which comes with a 3% fee and freebies.
There seems to be a growing number of drop-lock facilities whereby borrowers can take out a tracker rate and then swap to a fixed rate later without paying an early repayment charge.
Scottish Widows Bank has reminded us that it offers a switch and fix facility on some loans.
In The Loop Mortgages has launched a drop-lock rate. It is a two-year discount at 1.8% off the SVR with a pay rate of 4.19%. It has a £99 reservation fee and 1% product fee up to 85% LTV.
I think everyone is wary of discounted rates as there is no direct link to the base rate and we have already seen a number of lenders increasing their SVRs while the base rate hasn’t moved.
My biggest concern over loans with drop-locks is that borrowers assume they will be able to swap to a similar fixed rate to the ones available now, which is unlikely. So they will be swapping from an increasing discounted or tracker rate to an expensive fixed rate.
One significant event last week was Abbey’s announcement on fast-track. The good news is that it is keeping fast-track but is putting in some important caveats.
Historically Abbey has sampled some fast-track cases requesting proof of income. This seems reasonable but sometimes the timing has been poor. One broker I know had proof of income requested for his own application a couple of days before completion and he was worried it would delay things, but in the end it didn’t.
The sample is going to be chosen from transmission which presumably means applications within the previous month. Abbey wants us to keep proof of income for any fast-track cases for a minimum of two years.
It is my understanding that the regulator doesn’t require us to request clients for proof of income if lenders don’t ask for it and what clients tell us is plausible, so I guess this will need to change.
The most severe part of the announcement was that if we do not send in proof of income Abbey will remove the fast-track facility from the roker and no proc fee will be paid. We all know that if purchases fall through clients show little interest in providing proof of income. They don’t care if brokers lose their ability to submit under fast-track.
I understand Woolwich has pulled its rates, not because Barclays chief executive officers John Varley and Bob Diamond were too upset after foregoing their bonuses, but probably because Woolwich’s rates have been hugely competitive for a long time.
It is the only major lender with a base-linked reversionary rate.
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Heroes & Villains
HERO OF THE WEEK is The Mortgage Works for relaunching limited company buy-to-let loans. The range is aimed at customers who prefer to invest through a limited company and offers up to 70% LTV on selected products including fixed and tracker rates. It is great to see lenders expanding their buy-to-let ranges and hopefully more of them will follow TMW soon.
VILLAIN OF THE WEEK is housing minister John Healey for his recent insensitive comments about
repossessions. Telling people in danger of losing their homes that repossession can be the best option is just heartless, especially when his own housing needs have been subsidised by the state.