Marketwatch – April 2012

There has been much talk over the past week about our fine industry with two issues dominating - lending levels and proc fees.

It seems some major lenders are looking to lend less than they did last year, rather than their stated aim of at least matching it.

Whether this is done overtly or covertly remains to be seen, but seeing the limitations imposed on lending criteria and judging by the comments I receive, the cynics among you seem to have made up your mind.

Whatever the truth, we can only deal with what we have in front of us and we should take heart from the fact that consumers still want advice and trust us to give it.
Swaps rose across the board while LIBOR sauntered down once more. Three-month LIBOR is down at 1.01%.

1-year money is up 0.03% at 1.01%
2-year money is up 0.07 at 1.32%
3-year money is up 0.09 at 1.39%
5-year money is up 0.09% at 1.64%

Going back to proc fees, at least one major lender is said to be looking at fees linked to quality of business. This has been talked about for many years and makes sense. I have never liked the idea of proc fees linked to volume, but quality of business should help raise standards across the industry.

The issue is what quality means to different lenders. I advocate a standard proc fee which can remove any question of bias, set at around 0.35% for residential and 0.5% for buy-to-let whatever the distributor, club or volume level. But there is discussion about whether lenders should pay the same proc fees to those who consistently send in cases that are just not up to scratch.

ING Direct has joined the throng by reducing its interest-only offering to 50% LTV, as has Leeds Building Society. But ING will allow applicants to top up their borrowing with the remainder on a capital repayment basis to a maximum LTV of 80%.

ING also changed its acceptable repayment plans and tweaked some criteria.

Meanwhile, a tremendous 95% LTV product has just been launched for first-time buyers by Hanley Economic Building Society. Although only available through Legal & General’s Nouveau club, it has a rate of 5.09% discounted for three years with low fees.

According to the latest Moneyfacts report 95% LTV products have doubled over the past year. This flies in the face of media reports that sensible, high LTV lending no longer exists.

Paragon Mortgages and Mortgage Trust recently launched some two-year fixed rates while BM Solutions has tweaked its already excellent product range.

On a different note, our managing director is doing a project for his MBA on application to offer times. This varies dramatically between lenders so I would be interested to hear about experiences around the country.

heroes&villains

Hero of the week
Hanley Economic Building Society for providing competitive, sensibly underwritten 95% LTV products. There is nothing wrong with this type of lending if it is targeted at the right customers with the right advice.

Villain of the week
The Bank of England after the news that inflation has gone up – to 3.5% in March – rather than down as was predicted. So inflation is under control then? It seems more like a load of guesswork to me, Mr King.