But could that be what the Funding for Lending scheme turns out to be?
Although so far only RBS has tapped the government’s Funding for Lending scheme to launch a range of direct-only products, it already seems to have given the market a much-needed shake up.
Within hours of the Funding for Lending scheme officially launched HSBC had put out its now-infamous 2.99 per cent five-year fixed rate deal and then on Friday last week Santander matched the deal for existing clients on a direct-only basis.
Neither lender has so far accessed the Funding for Lending scheme and maybe it was just good timing on HSBC’s part but the fact is, there is now a full blown rate war – and it already seems to be spilling over into the intermediary market.
Brokers were understandably a little bruised that the Santander 2.99 per cent five-year product was not available to them – but look under the bonnet and it was pretty restrictive.
By contrast the three-year fixed rate its offering at 2.99% and 3.49% five-year product come with a flat fee and cashback and free legals options.
And as brokers are predicting in our lead story this week we may not have to wait long before a five-year broker product punches through the 3% level. Okay, maybe a ray of sunlight is overdoing it, but considering this is only week one of the Funding for Lending scheme being introduced, clearer skies look to be on the horizon.
Meanwhile, one dark cloud is potentially the introduction of an LTV cap as the International Monetary Fund suggested last week. Capital requirements have pretty much introduced a cap on the market anyway – lenders find it too expensive to offer high LTV deals – but a mandatory cap, as we have repeatedly said, is the wrong way to go.