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Market Watch 22/09/08

Swaps fell again last week. Most of the falls seemed to follow the weekend’s announcements about Lehman Brothers and Merrill Lynch.

  • One-year money is down 0.11% at 5.34%

  • Two-year money is down 0.1% at 5.16%

  • Three-year money is down 0.08% at 5.1%

  • Five-year money is down 0.04% at 5.12%

    Three-month LIBOR edged up to 5.79% but the increases in overnight dollar and sterling LIBOR rates were massive. On September 16, the former went up 3.3%. Ouch.

    Exactly 12 months ago last weekend, the news about Northern Rock’s liquidity issues hit the headlines and queues formed outside some of its branches. Sadly financial news grabbed the front pages again this week as Lehmans filed for bankruptcy and Merrill was taken over by Bank of America. While these two events feel moredistant as we did not see terrified depositors lining the streets, they will have a much bigger effect on the global banking industry.

    Bad news scares investors and anyone who was interested in buying mortgage assets has probably put their chequebooks back in their pockets for the foreseeable future.

    Seeing shares in the UK’s largest banks in freefall is terrifying and what happened to HBOS last week is unprecedented. The short sellers seemed hell-bent on bringing it to its knees and they should hang their heads in shame. I guess now they’ve been successful they won’t need mortgages, so they don’t care about the rest of the economy and will move onto the next victim.

    There must be reasonable activity in the market as we saw three lenders withdrawing rates at short notice, so borrowers must have been busy applying for them.

    Of those lenders, NR gave brokers the most notice for the withdrawal of its three-year fixed rate at 5.79%. We were given eight hours to get applications in. It also launched an excellent two-year fixed rate deal at 5.54% for loans up to 65% LTV with a £1,995 fee.

    Bank of Ireland withdrew its three-year buy-to-let fixed rate at 6.14% at 1pm with an application deadline of 5pm. Accord Mortgages was the least generous with its time. We were told at 11.15am that a large number of its rates were being withdrawn at 1pm.

    Well done to Abbey, which has significantly improved its range. It has cut rates at the 85% LTV level where there seems to be little competition and also removed the upfront element of its booking fee. This can now be capitalised. The upfront element was introduced in the summer, when I’m sure many brokers were booking rates just in case customers wanted to proceed.

    Its 85% LTV deals now start from 6.34% with a £995 fee for two and three-year fixed rates. Its 70% LTV two-year fixed rate with a £1,495 fee now starts at 5.54% but sadly it is capped at £250,000. It also has a 70% LTV two-year fixed rate with a £995 fee for loans up to £550,000 at 5.74% and a three-year fixed rate broker exclusive to 60% LTV at 5.64% with a £995 fee.

    It was great to see C&G slash a number of its two-year fixed rates. The headline one is at 5.48% for loans up to 60% LTV with a £1,995 fee.

    What is best about this product is its maximum loan size of £999, 999. It also features free valuation and legals for remort- gage cases.

    Royal Bank of Scotland Intermediary Partners has made changes to its residential products. The First Active two-year fixed rate remortgage deal up to 75% LTV dropped from 5.79% to 5.59% with a £999 fee. For purchases, its two-year fixed rate up to 75% LTV was cut from 5.74% to 5.54%. Sadly its two-year tracker rate for loans up to 90% LTV with a £999 fee increased from 6.24% to 6.44%.

    HBOS kept up its recent trick of changing a number of products on a Friday. Between 11am and noon, changes were announced to BM Solutions and Halifax’s ranges.

    Jonathan Cornell is managing director of Hamptons MortgagesHero of the week is Lloyds TSB for rescuing HBOS. We wish it well and hope it keeps its promise that all broker brands will survive. We need every lender that works with brokers right now.

    Villains of the week are the short sellers who seem hell-bent on bringing banks to their knees. I guess if they are successful they won’t need mortgages so they don’t care about the rest of us.

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