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History shows SVR anger is misplaced

Banker bashing is pretty much a national pastime these days and it’s a brave soul who heaps praise on them. But the only conclusion one can make from our cover feature in this week’s Lending Zone – which puts under the microscope the sticky issue of lenders’ funding costs – is that when it comes to the recent SVR increases, lenders deserve some applause.

Regulatory changes, the eurozone crisis and the residual effects of the financial crisis five years ago are all taking their toll and continue to be a toxic cocktail for lenders.

The net result for many providers has been that their costs have rocketed and had a knock-on effect on SVR levels.

“By comparison with average SVRs over the past 17 years, current rates are low”

As industry consultant Mehrdad Yousefi points out in the feature, if UK banks’ cost of funds have rocketed by 300% and SVRs have increased by 0.5% or 0.25% then that is not too big a burden. And when you look at the Council of Mortgage Lenders’ data on average SVR rates, which stretches back to January 1995, by comparison with average SVRs over the past 17 years, current rates are low.

In 1995 the average SVR was 8.21% and, until March 2009, when the Bank of England base rate fell to its current level of 0.5%, average SVRs fluctuated between 5% and 8%.

From 2009 onwards they have fluctuated around the 4% mark, with April’s average being 4.10% – fractionally up from 4.09% in March. The highest that SVRs have been in the three years since March 2009 was in January, when they hit a peak of 4.16%. Not a bad record, really.

But with a Greek exit threatening to send the market into turmoil, it will be interesting to see the extent to which lenders can keep a lid on SVRs if funding costs rocket further.

Elsewhere in this month’s issue, Christian Faes, managing director of Montello Bridging Finance, argues that when it comes to bridging lenders, brokers should carry out more due diligence instead of just looking for a Financial Services Authority stamp.

“By comparison with average SVRs over the past 17 years, current rates are low”

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Apple: a stellar technology story

By Ali Unwin, head of technology sector research

Apple recently announced the highest-ever recorded quarterly net profit ($18bn), with the sale of 74.4 million iPhones helping the company deliver $74.6bn of revenue for the quarter ending December 2014. These sales were largely driven by strong demand for the new iPhone 6 and iPhone 6 Plus. Highlights included Chinese iPhone sales doubling year-on-year and unit growth of 44% in the US — supposedly a well-penetrated market. Apple ended the quarter with $178bn in cash on its balance sheet, having generated a staggering $30bn in free cash flow during the quarter.

At Neptune, we have been long-term believers in the Apple story, and continue to hold the stock in a number of our portfolios based on the company’s long-term growth prospects. This is predicated on our belief that Apple has proved thus far that it can — unusually for a consumer electronics company — maintain high margins for a sustained period of time, even as adoption of new technology slows down and competitors produce similar-specification products.

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