Swaps fell significantly for the second week in a row. Three-month LIBOR is unchanged at 0.70%.
1-year money is unchanged at 0.93%
2-year money is down 0.12% at 1.43%
3-year money is down 0.20% at 1.83%
5-year money is down 0.25% at 2.53%
Cheltenham & Gloucester’s Low Start first-time buyer tracker mortgage starts at Bank of England base rate less 0.01% until the end of this year and then increases to base plus 5.49% until July 31 2012.
This is a truly awful rate which exposes innocent first-time buyers to a level of payment shock that beggars belief.
If other lenders are going to launch rates as ill thought out as this, maybe the Financial Services Authority’s proposal to regulate individual products isn’t such a bad idea. The only good news is that it’s a direct product so brokers won’t get the blame.
A borrower on an interest-only loan who borrowed £125,000 would see their payments go up from £51.04 to £623.96, assuming the base rate stayed the same.
Even on a repayment basis over 25 years the payment would go from £442.79 to £804.61.
It is interesting to look through the main complaints with data from the Financial Ombudsman Service. A substantial amount relate to SVRs but it has also reported an increase in complaints about the suitability of fixed rates where borrowers believe they should have had a tracker or a discount.
I bet these were the ones who wanted a fixed rate for budgetary stability, then saw the base rate plunge and changed their minds.
No doubt they will switch to trackers and discounts just in time for the rate rise so they can complain they should have been sold a fixed rate.
I was disappointed to see that Nationwide will no longer lend on former local authority flats in blocks of more than five storeys. This also applies to maisonettes and Scottish tenements that were or are in local authority ownership.
But I am sure I am less disappointed than the owners who will see the values of their properties fall. I hope we don’t see other lenders following suit as then only cash buyers will be able to buy these properties. It will be interesting to see how the Liberal Democrats’ plans to reduce the size of banks play out in the coalition. I can understand why the idea that stripping out investment banking from normal banking will suddenly make the system safer may appeal.
But let’s look at the facts – Northern Rock failed because it was too dependent on short-term funding, Bradford & Bingley lost too much on buy-to-let loans, HBOS lost too much on corporate loans and was too exposed to the housing sector and the Royal Bank of Scotland decided to purchase ABN Amro.
The banning of banks from proprietary trading wouldn’t have saved any of them.
HERO OF THE WEEK is Paragon that has reported an 83% rise in profits and is preparing for the resumption of lending. It is possible to lend prudently and profitably in the buy-to-let market and this is a sign that the sector is recovering.
VILLAIN OF THE WEEK is Cheltenham & Gloucester for its Low Start first-time buyer tracker mortgage. This ill thought out rate exposes innocent first-time buyers to a level of payment shock that is just unbelievable.