Nationwide has bravely removed free legals, while Aldermore is the latest lender to outline its plans for portfolio landlords
Although the UK unemployment rate is at its lowest since 1975 on just 4.5 per cent, there are still dark clouds on the horizon for the economy.
Manufacturing and construction have shrunk, with weaker-than-expected results, while a widening trade deficit, falling sterling and stubbornly slow wage growth are causing doubts about the wisdom of any talk of an interest rate hike.
Bank of England deputy governor Ben Broadbent claims he is “not ready to raise interest rates due to there being too many ‘imponderables’ in the economy”. Some economists have already cut back to 0.2 per cent their predictions for Q2 growth, playing into the MPC doves’ hands.
In other news, the Royal Institution of Chartered Surveyors says the number of new homes on the market has fallen to a new low as buyers are “stifled” by uncertainty.
Interestingly, Brexit was not the main concern but rather the general political uncertainty in the UK. New instructions have also fallen, for the 16th month in a row.
I was mildly concerned by the PRA’s shot across lenders’ bows in saying that longer-term mortgages were against the “spirit” of regulation and insinuating that 25-year terms should be the normal maximum. I disagree. A term should be carefully thought out based on several factors, such as retirement age, affordability and life plans. It should also be carefully discussed when remortgaging to ensure it is still relevant (which execution-only digital or direct-to-lender propositions may not do).
There is nothing wrong with a 35-year term if it is relevant and affordable. Indeed, 25 years is an anachronistic and lazy way of looking at the world.
In the markets, three-month Libor is still at 0.3 per cent while swap rates are resting from their recent ascent.
2-year money is down 0.01% at 0.66%
3-year money is down 0.01% at 0.77%
5-year money is down 0.02% at 0.95%
10-year money is down 0.02% at 1.33%
Nationwide has removed free legals and raised its remortgage cashback to £500. This is a brave move and one I applaud as it sends a message to free legals firms that brokers and lenders cannot have their reputations tarnished by poor service. Some have really turned it around, with providers such as Optima Legal greatly improving their service.
But there is still a lot of work to be done by others.
Elsewhere, Digital Mortgages from Atom Bank has cut rates again, with two-year fixes from 1.34 per cent at 60 per cent LTV and 1.85 per cent at 90 per cent LTV, and five-year fixes from 1.9 per cent.
Most changes this week have been in buy-to-let, with Aldermore the latest to paint a picture of what lending to portfolio landlords will look like for it. Interestingly, it has further split landlords into those who own 11 properties or more, who now need a face-to-face interview, a 12-month cashflow forecast and a statement of assets and liabilities. Other checks will include portfolio affordability testing, business plan, rental income validation by postcode, and, where personal income is used, assessment of living costs and essential expenditure.
Aldermore also has new fee-free remortgage products, new three- and five-year fixes, and more fee options. Its five-year fixed remortgage-only rate is at 3.78 per cent, which is completely fee free and stressed at 3.98 per cent.
BTL bastion Paragon has also confirmed it will implement its additional changes well before the deadline set by the PRA.
In a move that I think will not be the last, Keystone has raised its proc fee to 0.7 per cent.
BM Solutions has cut two-year fixes by up to 0.3 per cent and reduced some fees. It has a two-year fix at 75 per cent LTV priced at 2.24 per cent with a £995 fee.
TMW has two-year trackers from 1.39 per cent and five-year fix reductions up to 0.15 per cent.
Finally, it was a shame to see FCA mortgage manager Lynda Blackwell step down after 16 years. I found Lynda very approachable and enjoyed our discussions. I always got from her a passion for the industry and we should thank her for her time.
Heroes and villains
Nationwide – for its move on free legals; and ex-FCA mortgage manager Lynda Blackwell.
Builders – for gagging buyers over their own shoddy work. They really don’t help themselves, do they?
Andrew Montlake is director at Coreco