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Market Watch: Beyond the Bank of Mum and Dad

As the Bank of Mum and Dad assists with a quarter of all transactions, who will the next generation turn to for help?

Much of the news last week was dominated by our ninth-biggest lender. Yep, the good old Bank of Mum and Dad is forecast to lend £6.5bn this year, putting it on a par with Yorkshire Building Society, according to a study from Legal & General.

The Bank of Mum and Dad now helps with a quarter of all property transactions. For those under the age of 35, around 62 per cent seek financial help from family and friends.

This just goes to show the challenges facing the current generation. The big question now is where the help will come from for the next generation. We need to plan for the long term. That said, any faith in the Government to sort out our housing market seems more than fanciful.

And on the subject of the Government, there has been some interesting speculation around why Prime Minister Theresa May really called an early election. Could it be that economic data is starting to turn? With consumer confidence also deemed to have peaked, perhaps the Tories have chosen to act now before things start to play into opponents’ hands.

Where interest rates are concerned, former MPC member Andrew Sentence believes they will be back up to 2 per cent to 3 per cent by the early 2020s. Much of this depends upon Brexit negotiations. If the rumours of recent conversations are true, May and European Commission president Jean-Claude Juncker will be at each other’s throats for a while yet.

In the markets, three-month Libor is down a bit further at 0.32 per cent while swap rates have continued to labour upwards.

2-year money is up 0.01% at 0.57%
3-year money is up 0.02% at 0.65%
5-year money is up 0.02% at 0.81%
10-year money is up 0.05% at 1.18%

In the mortgage world, there has been the usual flurry of rate changes and activity.

HSBC is back with a vengeance with new rates that say: ‘Disrupt away, online banks. We are still here.’ The five-year fix is the show-stopper at 1.69 per cent with a £999 fee to 60 per cent LTV, but its tracker at 1.09 per cent is pretty nice too.

Ninety per cent LTV products are available from 1.89 per cent for a two-year tracker or 1.94 per cent for a two-year fix.

Halifax has reduced its two-year fix to 75 per cent LTV by 0.4 per cent and has new two-year fixes, to 60 per cent LTV at 1.39 per cent and to 80 per cent LTV at 2.09 per cent. Both have a £1,499 fee.

Bank of Ireland has released its First Start products available on a joint-borrower/sole-proprietor basis. This involves a sponsor (a close relative, for example) being added as a co-borrower.

The products are available up to 95 per cent LTV and rates are 3.29 per cent at 90 per cent LTV and 4.48 per cent at 95 per cent LTV on a five-year fixed basis, with no fees and a £500 cashback. The maximum loan is £500,000.

Elsewhere, NatWest has reduced five-year fixes at higher LTVs, with its 90 per cent rate now at 2.93 per cent, among a plethora of other changes.

Its Semi-Exclusive range sees its 85 per cent LTV five-year fix
falling to 2.3 per cent with a £995 fee, as well as reductions to its
BTL rates.

It is also worth mentioning Kensington’s revised Premier Lending range, which includes unusual one-year fixed rates with no application fees.

Investec Private Banking has launched a range of fixed rates across its BTL mortgages and has linked its tracker products to Investec bank base rate rather than three-month Libor. The fixed-rate deals start from 2.69 per cent at 50 per cent LTV and are available up to 70 per cent LTV.

Precise has increased the product fee on its 2.99 per cent five-year fix to 3 per cent of the loan amount, no doubt because it is inundated with applications for the pay rate product.

Finally, there is some noise about lenders not accepting BTL applications from landlords who rent to people on housing benefit. According to Shelter, this leaves many in a vulnerable state because they are stuck in unsuitable accommodation.

Perhaps this is something that we need to take a long look at.


Andrew Montlake is director at Coreco



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