After encouraging everyone to spend and lenders to lend, the Bank of England is worried this is happening too much
The governor of the Bank of England seems to be doing his best Inspector Clouseau impersonation with his “Now is not the time, Cato; now is the time!” comments regarding interest rates.
We appreciate how tough it is to accurately guide people on the future direction and pace of change given recent unexpected events, but sending out perfunctory mixed messages just serves to confuse and unsettle markets and the public alike.
In fact, everything seems a bit confusing where politics, economics and contradictory policies are concerned. Where are the constants that we based our instincts on?
Meanwhile, after encouraging everyone to spend and lenders to lend, it seems the Bank of England is worried this is happening too much. It has tightened affordability rules as it believes underwriting standards are loosening. Well, that is not something I am seeing!
In any case, the new rule says lenders should consider how borrowers would handle a 3 per cent increase in their SVR rather than in Base rate. Most lenders already stress test at higher rates, around 6 per cent to 7 per cent, making it difficult for buyers to stretch incomes. So it seems unnecessary to tighten this further, especially when the real issues lie in the unsecured debt markets.
Credit cards, car finance and short-term loans are always the main issue, where affordability calculations are often non-existent, and these are usually the precursors to more serious financial problems. It is here that regulators should spend their time, rather than interfere further in a mortgage market that is, overall, in a good, robust and prudent place.
In the markets, three-month Libor is up a bit at 0.3 per cent while swap rates have risen.
2-year money is up 0.09 per cent at 0.59 per cent
3-year money is up 0.11 per cent at 0.67 per cent
5-year money is up 0.11 per cent at 0.81 per cent
10-year money is up 0.08 per cent at 1.14 per cent
In the product world, Barclays has cut a selection of rates and has a five-year fix at 1.7 per cent with a £999 fee to 60 per cent LTV, a two-year fix from 1.19 per cent, and its 95 per cent LTV product is now at 3.89 per cent with no fees.
Its BTL rates have also been cut and are available from 1.54 per cent for a two-year fix at 60 per cent LTV with a £1,950 fee.
Barclays has also tweaked its income multiples so now those with a single or combined income of £45,000 or more can get five times income. For those earning less or looking at an LTV of 85 per cent or more, the maximum is 4.49 times income. There are still exceptions for Family Springboard and Premier customers.
Santander’s improvements include a five-year fix at 1.79 per cent with a £999 fee to 60 per cent LTV, or 1.99 per cent to 75 per cent LTV, and a 90 per cent LTV two-year fix at 2.54 per cent with no fee.
Virgin Money’s five-year fix remortgage special to 50 per cent LTV is reduced to 1.64 per cent with a £1,995 fee.
Furness Building Society has a two-year fix to 80 per cent LTV with a pay rate of 1.49 per cent and a £999 fee, while Kensington is now supporting Help to Buy with rates from 3.64 per cent.
Specialist Saffron Building Society has new products including an ex-pat BTL scheme at 3.69 per cent discounted for three years with a 2.5 per cent arrangement fee. Its self-build product is now at 4.2 per cent with a 1 per cent fee.
Pepper Homeloans now offers two-year and 30-month fixes from 2.28 per cent up to 70 per cent LTV and 2.78 per cent up to 85 per cent LTV, with five-year fixes starting at 2.88 per cent, all for purchase and remortgage.
In BTL, OneSavings Bank published an interesting report on BTL Britain. Among the stats it showed that average rents had hit a record high of £889 a month, but annual inflation had eased to 1.9 per cent.
Finally, I was delighted to see Atom Bank’s Maria Harris win the coveted Women in Finance Award for Best Banker. There are great female role models in our industry but still too few in senior positions.
Hero of the week
Maria Harris from Atom Bank – one of the role models for women starting out in our industry.
Villain of the week
Conflicting policies from regulators and uncertain statements from those meant to guide us.
Andrew Montlake is a director at Coreco