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Market watch 3 March 2008

Swaps continued to edge upwards last week, but they seem to play virtually no role in dictating what happens to mortgage rates.

  • One-year money is up 0.11% at 5.39%
  • Two-year money is up 0.15% at 5.09%
  • Three-year money is up 0.15% at 5.10%
  • Five-year money is up 0.13% at 5.16%

It was worrying to hear Bank of England deputy governor Rachel Lomax say the outlook for the economy has changed dramatically and that there is uncertainty about the impact of “the largest ever peacetime liquidity crisis”. She also warned that the crisis will significantly reduce demand over the next two years.

With inflation expected to rise sharply, this may lead to higher interest rates. The Monetary Policy Committee will face a growing challenge to keep inflation under controlwhile fending off a housing market recession.

The housing sector has helped the economy wea-ther previous fin-ancial storms as home owners have maintained their spending levels by remortgaging.

At the beginn-ing of last week, we were told that Abb-ey would be withdrawing some products towards the end of the week. We heard rumours that everything was going, but nothing was certain.

This is a daft situation. If Abbey tells its staff something, it’s natural for them to tell the brokers they deal with. But nobody knew if everything was going to be pulled or just selected products.

I would rather a lender gave us less notice but accurate information. Uncertainty makes us look like idiots in the eyes of our clients. The shame is that Abbey has had some outstanding rates recently and has also extended a rate withdrawal deadline to give us more time.

I’ve lost count of the number of lenders that have repriced with virtually no notice recently. When lenders do this simultaneously it makes brokers’ lives a nightmare – we can’t be everywhere at the same time to key in applications.

Unsurprisingly, Royal Bank of Scotland Intermediary Partners has pulled the 100% LTV deals on its RBS product range. It has also cut the maximum LTV on the One account current account and flexible mortgages from 99% to 95%.

Since the One account team was split from the rest of RBSIP’s brokers, its business levels have rocketed and its mortgages seem to be flying out the window. This was a great decision by RBSIP after amalgamating its brand teams a few years ago. RBS is making progress in becoming a serious intermediary lender as Chris Pearson and his team continue to make it easier for us to deal with.

Another high LTV casualty is Scottish Widows Bank which has cut the maximum borrowing on its professional mortgage to 100% LTV. SWB does a good job in high LTV lending to professional groups.

Accord Mortgages has also made some changes to its LTVs recently. The maximum LTV on prime deals is now 90%, on prime self-cert it is 75% and on near-prime 80%.

The maximum LTV on its near-prime plus and me-dium deals is 75%.

Accord’s heavy and self-cert ad-verse ranges have been withdrawn.

Cheltenham & Gloucester has add-ed a 1%, three-year early repayment charge to its mainstream trackers.

I guess that like a lot of lenders, it has seen volumes of ERC-free trackers go through the roof. Brokers have started selling its products to clients who want to hedge their bets on the base rate and the mortgage market, hoping that when the dust settles they can remortgage them onto more competitive rates.

One lender that has taken a cautious approach to prime lending is Skipton, which has decided to restrict its maximum loan size to £250,000 and its maximum LTV to 75%. This seems ultra-conservative and is a shame as Skipton is a good, common sense lender.

Jonathan Cornell is managing director of HamptonsMortgages


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