- One-year money is up 0.11% at 5.46%
- Two-year money is up 0.07% at 5.03%
- Three-year money is up 0.05% at 4.96%
- Five-year money is up 0.03% at 4.98%
Bah humbug to the Bank of England for the miserly £5bn it auctioned on Monday. With the markets clamouring for money and liquidity scarcer than fans of the Budget, this amount was less than a quarter of the £23.6bn financial organisations had bid for.
With lenders repricing weekly to slow their business volumes and LIBOR going through the roof, the BoE should roll up its sleeves and inject more money into the market soon. Inflation has hit a nine-month highof 2.5%, a full 0.5% above the official target.
Because of this, the Monetary Policy Committee is effectively stuck between a rock and a hard place.
It needs to cut rates to stimulate the economy and especially the housing market, but if it does so it risks pushing inflation even higher.
Some commentators are suggesting that the MPC will announce a surprise base rate cut but I doubt it. Things here aren’t as bad as in the US where the Federal Reserve slashed another 0.75% off interest rates.
The minutes of March’s MPC meeting show that seven members voted to keep the base rate on hold at 5.25% and two voted to cut it for the second month in succession. The members who voted for a cut were BoE deputy governor John Gieve and David Blanchflower.
So many things changed last week that it would probably be easier to list the lenders that have not repriced or altered their criteria. Indeed, the way LTVs are falling you’ll soon have to have been married to a former member of The Beatles before you can put down a large enough deposit for some lenders.
For example, Leicester-based mutual Earl Shilton has decided to reduce its maximum LTV to 50% because of too much demand for its products.
Meanwhile, it was sad to hear Commercial First ann-ounce that it is to stop lending. It’s a shame that a profitable lender with a healthy loan book can’t obtain funding in the current climate.
Scottish Widows Bank withdrew a number of its products at just one hour’s notice last week. The email was received at 4pm and gave a deadline of 5pm. This is the second time SWB has done this. I realise it must be busy at the moment but I’d have thought it should have been possible to plan things better.
When lenders withdraw products, notice periods as short as this make brokers look incompetent. Borrowers don’t understand why they lose out on these deals and blame us.
If a lender gives, say, a day’s notice of a rate change, at least some online applications can be submitted.
Bank of Scotland withdrew a number of its mainstream and large loan products last Wednesday, giving us just four hours’ notice.
Heritable Bank has decided to withdraw from lending on new-build flats, but it will look at applications for converted properties on a case-by-case basis.
CHL Mortgages has decided to restrict its maximum LTV on buy-to-let deals to 80%. The lender has also stopped lending on new-build properties and tightened its credit scoring process.
Mortgages PLC has withdrawn its prime buy-to-let range and gave us a creditable eight days’ notice. I’m sure that when funding returns to normality, MPLC will return to the buy-to-let sector.