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Letters of the month

MS-LettersLETTER OF THE MONTH: Any rise in Bank rate is likely to be marginal — no financial meltdown

If interest rates increase this week it is likely to be marginal, to say the least, and probably no higher than a return to 0.5 per cent, which is actually the norm.

This slight hike is designed to counter the rising level of inflation and will increase the monthly cost of some mortgages — in particular, variable-rate loans and tracker deals.

But any increase in monthly payments, like interest rates themselves, will be marginal and manageable for those impacted. On the typical £150,000 loan, homeowners will be out of pocket by around £15 to £30 a month: certainly no grounds to shout ‘financial meltdown’.

I’m old enough to remember the unprecedented cost of money at a whopping 15 per cent in 1989, resulting in homeowners posting their keys back to banks through their letterboxes. We’re leagues away from such a suffocating level and must not mistake this week’s likely tweak for anything more sinister or prohibitive.

House price growth and the market’s overall stability have been incredibly resilient despite the EU vote and snap general election. A few quid added to the average mortgage repayment will not deter this growth in the medium to long term.

Speculation on rate rise may nudge borrowers — but even 0.25% increase could lead landlords to pass on costs

The potential for the first rise in Bank rate for over a decade has fuelled market speculation.

Any rate increase will be small and will serve to drive further the shift towards long-term deals, with consumers keen to fix for five years on low rates before any additional rate rises leave a more lasting impact on the market.

In August, two in five customers (39 per cent) fixed onto a five-year deal — the highest number recorded by LMS.

Despite it being a slower month for lending, the mortgage market remains strong and robust, even amid talk of a potential rise in interest rates.

Thousands of borrowers are still securing their mortgage rate before the Bank of England raises the base rate.

But people should remember that a rise won’t return us to the higher rates of the past just yet.

If anything, it should act as a nudge to borrowers who haven’t yet remortgaged to secure their rate by contacting a broker now, before further rises.

The threat of rising mortgage rates, in a world where most people have less in their pocket, could be the impetus borrowers need to try to reduce their monthly outgoings.

It could mean a strong finish to the year despite everything.

Landlords have had to face a catalogue of challenges over the past couple of years, from stricter regulation and reductions to tax relief to a significant stamp duty hike when buying a buy-to-let property.

Yet, despite these pressures, there has been little sign of them passing on these costs to tenants in the form of higher rents. Record-low mortgage rates have enabled them to absorb some of the costs, so a base rate rise could make all the difference.

A 0.25 per cent uplift may seem small but the message it would give to the markets, of monetary policy normalisation, could spook landlords, especially those embarking on long-term tenancies.

In itself, a quarter of a per cent is not going to have a huge impact on rental prices overnight. But, symbolically, it has the power to galvanise landlords to price in many of the tax and regulatory changes that have been building up for some time now.

Halifax slammed as ‘deplorable’ for offering direct customers £250 cashback

From one of the largest lenders in the UK this is extremely cutting to those who feed it a large share of its business and growth.

This has the potential to damage broker/lender relationships for £250 a case. Some clients will cross-reference information and, if they can, get the same deal elsewhere.

But, for an extra £250 cashback, not having to pay a broker fee and not having to compile the overly onerous paperwork required by brokers, [clients could] take the broker’s knowledge and run to the nearest branch direct.

Deplorable actions from Halifax on this and, sadly, that won’t bother it in the slightest.

Well, Halifax letting itself down again in a competitive broker marketplace.

Can’t help thinking that Halifax is the lender equivalent of Portsmouth FC…

Halifax dual pricing again? Who’d have thought it?

And we’re all so important to it too!

In most cases, the deals available with other lenders will work out cheaper than Halifax’s, with or without cashback — unless, of course, Halifax suddenly brings out market-leading rates.

I use Halifax more for its niche areas than for anything else and also because the BDM I have is excellent.

I guess it is a pity that the powers that be didn’t run this by the broker community before launching it.

In my view it is sensible to compare direct products, when using the sourcing systems, to ensure you know what is out there.

On most sourcing systems it shows the direct products, even though a broker cannot access them.

If a lender does bring out a market-leading direct deal and brokers advise their clients to go direct, the lender will soon get swamped and unable to cope.

This behaviour will ultimately lead to such deals being withdrawn anyway.

Large lenders’ hidden ‘all monies charge’ should be made clearer to clients, say brokers

How exactly do these lenders argue that this is clear, fair and not misleading?

The advice to any client where they threaten to do this seems to be to make an immediate regulated complaint.

This is nothing new in the industry. AMCs have been part of the legal process for some lenders for years but are perhaps a little-used tool in debt recovery.

The answer for consumers (other than to avoid using lenders that use AMCs) is to take unsecured borrowings from lenders other than their mortgage lender. In that way the charge cannot be applied to those unsecured debts.

Even this, though, may not prevent High Court enforcement from taking control of assets that could include property such as houses, should such debt recovery processes be needed by an unsecured lender.



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