Marketwatch 08/12/2008

Swaps continued to plummet but we have not seen any further improvements in fixed rate deals. And three-month LIBOR is now 3.79% but we have not seen any movement in tracker pricing either.

1-year money is down 0.34% at 2.57%
2-year money is down 0.31% at 2.89%
2-year money is down 0.35% at 3.05%
5-year money is down 0.37% at 3.33%

Bank of Scotland should be commended for piloting a four-month scheme to pay brokers for product transfers.
But one quirk to be aware of is that product fees must be payable on application rather than completion so brokers can’t use it as a holding option to wait and see if something better comes along.

Brokers should bear that in mind before they commit clients to product fees of up to £4,499. BoS has a large number of cases on base rate minus 0.76% coming up in the next few months. Its SVR is one of the highest at 5.35%.

Is it me or is anyone else bored of the national media and politicians calling for lenders to pass base rate cuts on without understanding what this entails?

They seem to think that if lenders pass on rate cuts via their SVRs, it’s job done.

But only a small percentage of clients are on SVRs, although this figure must be growing steadily month by month. To help new borrowers, cuts must be passed on via new products.

Borrowers won’t do quite so well from last week’s base rate cut as they did from the previous one.

With so few lenders left in the market the remaining ones don’t have to compete on price. They will mop up their market share quite happily.

We can huff and puff as much as we like but lenders are out for themselves. Most survivors must be looking at an extremely profitable future with so few players left in the market.

Although rates have not come down as much as we would like, it is still worth having another look at some of the fixed rate deals signed in the spring when dual pricing was at its worst.

I am sure that for some of the lowest LTV deals it is worth borrowers paying early repayment charges and remortgaging onto new products.

But if you do this, don’t forget to make sure your files explain why borrowers are better off doing so, otherwise it will look like mis-selling.

Well done to the Royal Bank of Scotland for confirming it will provide a six-month grace period for repossessions.
I think most prime lenders do this as a matter of course these days and in practice only move more quickly on buy-to-let and sub-prime mortgages.

It was a PR masterstroke for RBS as the six-month grace period was revealed on the same day we found out how few private investors had taken up its rights issue. That way RBS isn’t seen to be biting the hand that feeds it.

Northern Rock has made the same offer, which is good news for customers in financial difficulties.

It will be interesting to see what happens with the collars on lenders’ tracker rates.

The Financial Services Authority has expressed some interest in this area but I think most lenders will do their best to stand their ground.

In my view, if lenders can prove that clients were aware of the collars because they were noted in Key Facts Illustrations or offer letters, they will have a better case than if the information was hidden in the small print.
It was good to see HSBC increase the rate on its broker- killing lifetime tracker product from 0.99% above base to 1.64%.

I think this has moved it about 0.75% closer to the nearest available broker product with no ERCs. Every little helps.
And with the Treating Customers Fairly deadline looming, if you are unsure of what to do please have a look at www.tcfinfo.co.uk. It is a great resource.