I don’t think many people were expecting the increase but the main reason for such an early rise became apparent when the government’s chosen inflation measure – the Consumer Price Index – was made public last Tuesday.
With the CPI now standing at 1% above its intended target of 2%, further rate rises can’t be ruled out. If CPI inflation rises above 3%, Bank of England governor Mervyn King will have to write a letter of explanation to chancellor Gordon Brown.
This is something that has not happened since the BoE gained independence in 1997.
One-year money is up 0.23% at 5.86%
Two-year money is up 0.20% at 5.74%
Three-year mon-ey is up 0.15% at 5.67%
Five-year money is up 0.12% at 5.54%
Where do I start this week? I don’t think I have ever seen a busier week for rate changes – it is easier to look at which lenders have not repriced. I am slightly reticent about quoting fixed rates as it’s quite possible that they will all be pulled by the time you read this.
Keep an eye out for the submission dates for buy-to-let business based on the rental calculation pre-base rate increase as these will all expire soon. The recent increases in the base rate are likely to make it more difficult to do high LTV buy-to-let business.
Well done to Mortgage Express for increasing its buy-to-let portfolio limit from 2m to 5m. This moves it back into line with its major buy-to-let competition. It is possible for some clients to go above this, subject to approval from MEX.
I guess there must be a few red faces at Bank of Scotland after it emailed its new large loans rates. Rates of 4.59% and 4.80% were offered on Monday but eagle-eyed brokers who checked its website would have found that these were linked to the BoS base rate which had not been increased yet.
It was a shame that BoS did not do this before sending out its new rates. Maybe it was so excited at celebrating the 300th anniversary of Scotland’s union with England the following day.
Those rates should have been 4.84% and 5.05%, taking into account the increase. Both rates are available up to 90% LTV for loans above 250,000 for remortgages. The 4.84% rate has a 2,499 fee and the 5.05% rate has a 1,199 fee. It was good to see Bank of Scotland launch a buy-to-let range with a slightly easier rental calculation of 125% on base plus 0.50% rather than base plus 0.75% which is the normal calculation.
For small brokers who are concerned by the results of the Financial Services Authority’s Mortgage Quality of Advice Study, a great first place to look for help and guidance is the Association of Mortgage Intermediaries’ website. AMI’s factsheets are invaluable and make dealing with regulation a lot easier.
While I was not keen on the ex-tended early re-payment charges on GMAC-RFC’s buy-to-let tracker, this product is proving popular if the rental calculation is tough.
Also, the rate during the deal’s extended ERCs is base plus 0.99% which is not bad for a reversionary rate.
When I checked my emails on Monday morning I was surprised to see that Northern Rock had posted an update – sent at 12:05am that day – saying: “The outgoing products are only available until close of business on Sunday January 14. Full details on the withdrawal procedures are at the bottom of this page.” Thanks for reminding us they had gone.
I am struggling to keep track of Northern Rock’s rates. It’s Intermediary Product Update number 69 was dated January 15 2007 but by January 17 it was announced that these rates would be withdrawn.
Jonathan Cornell is technical director at Hamptons Mortgages