As the credibility of both the Fed and the BoE is questioned, will we see a plethora of mortgage rate cuts once more?
Credibility. Now there’s a word. A word you would have thought was pretty important for any economic institution, especially when that institution sets out policies meant to be in everyone’s best interest. But it is a word that both the Bank of England and the US Federal Reserve have been struggling to come to terms with for a while.
It has been blindingly obvious for some time that many economists, especially the self-appointed ones, have simply been holding a finger in the air to make their ‘predictions’. But those in positions of power should be a bit more honest.
We now find ourselves in a position where the US is being lambasted for raising rates too soon, too determined to talk itself into a rise that it could then not go back from, while Bank of England governor Mark Carney, who had said rate rises would come into focus “at the turn of the year”, is trying to work out which year he actually meant.
With inflation predicted to stay below 1 per cent for the remainder of the year and GDP growth revised down for the next three years, even Monetary Policy Committee serial dissenter Ian McCafferty has pulled back to give a unanimous position of “no change”.
Now, I know this is all a little harsh as a global market these days is so hard to predict, but while trying to keep the markets stable is one thing, a little more open honesty would be welcome.
While there is no sign of any wage inflation, it looks like the status quo will be maintained for a while yet. But with the City now predicting a one-in-four chance of the next move being a cut, you never quite know.
In the markets this week, three-month Libor is still 0.59 per cent while swap rates have, once again, dropped their trousers.
2-year money is down 0.08% at 0.78%
3-year money is down 0.12% at 0.89%
5-year money is down 0.15% at 1.11%
10-year money is down 0.11% at 1.58%
So, on the back of all this, are we going to see a plethora of rate cuts once more? The return of lots of 1.99 per cent five-year fixes?
Barclays continues its impressive run with the release of its Help to Buy London products. These include two-year fixes at 1.55 per cent with a £999 fee and five-year fixes from 2.19 per cent. It has also reduced some other rates.
TSB has cut rates, with its two-year fix at 60 per cent LTV now 1.44 per cent with a £1,995 fee and five-year products now from 2.34 per cent with a £999 fee.
On the buy-to-let side, Santander is the latest lender to increase its stress rate from 5 per cent to 5.5 per cent above 60 per cent LTV.
Such movement from lenders could be a positive in that it shows the powers that be they do not need to impose further changes on the buy-to-let market as the lenders are doing their bit in controlling things. Any further movement would cause an awful lot of buy-to-let mortgage prisoners. If there are to be further regulation changes, capping LTVs at 75 per cent would seem the most sensible.
Clydesdale has an excellent product for larger buy-to-lets in London, up to loan sizes of £1.5m. At 60 per cent LTV you can now get 2.79 per cent fixed for two years with a £2,999 fee.
Kent Reliance has changed its rental coverage, with experienced landlords able to get 110 per cent rental cover at the stress rate, while inexperienced landlords (those with fewer than three properties) will contend with a 130 per cent coverage.
Fleet Mortgages will now do 70 per cent LTV on buy-to-let new-build and accept more than one kitchen on HMOs, while Aldermore has cut buy-to-let five-year fixes to 3.99 per cent with a 2.5 per cent fee. Up to 80 per cent LTV, they are available to personal borrowers and limited companies with a pay rate calculation.
It was interesting to see the Council of Mortgage Lenders urging the Government to review the planned stamp duty changes, stating that “if the surcharge proposal is designed to promote homeownership, we think that there should be better evidence as to why this requires a reversal of growth in the private rented sector”.