Market Watch: MCD deadline could cause bottleneck


As the MCD approaches, some lenders may pull back and raise rates to reduce business levels over the transition period

Another week and another step closer to the European Mortgage Credit Directive. Considering the way some lenders are talking, it seems this could cause yet another bottleneck in terms of underwriting and service.

We are seeing this already on the buy-to-let side as borrowers try to get those last-minute deals done before the stamp duty deadline. We should probably be telling customers now that it is simply not going to happen, rather than adding more fuel to the fire.

Indeed, it is no surprise that buy-to-let lending is reportedly at its highest levels since 2007 with lenders processing £10bn of loans to landlords in the fourth quarter of 2015. In fact, as the MCD approaches we may see some lenders pulling back and raising rates to cut down on business levels over the transition period, much like we saw with the MMR. Even though many people think this whole thing is relatively simple, there are bound to be teething issues around the likes of documentation.

Meanwhile, Bank of England governor Mark Carney and the Queen herself have been cited for allegedly getting involved in the Brexit debate, with Carney accused of taking a pro-EU stance in a speech he gave.

To be fair, he should be in a position of knowledge about the threats we face from an exit, so why shouldn’t he voice them? Is it not part of his job to ensure financial stability?

In the markets this week, three-month Libor has continued its stationary strike at 0.59 per cent while swap rates have crept up again.

■ 2-year money is up 0.04% at 0.81%
■ 3-year money is up 0.06% at 0.89%
■ 5-year money is up 0.10% at 0.99%
■ 10-year money is up 0.11% at 1.42%

In the weird and wonderful world of mortgage products, Virgin Money has made some interesting changes, introducing a maximum loan-to-income multiple of just 3.5 times on interest-only and part-and-part applications. As a peace offering, it has also reduced the minimum income requirement from £100,000 to £50,000 and removed its requirement for a minimum property value of £500,000. It has also created a ‘first-time buyer zone’ on its website, which contains some useful items.

Leeds Building Society has launched the lowest-ever 10-year fixed rate, priced at just 2.75 per cent with a £1,499 fee and available up to 65 per cent loan-to-value. The product is portable with tapered early repayment charges starting at 6 per cent and will allow borrowers to make overpayments of up to 10 per cent per annum. Leeds will also now consider gifted deposits where the gift is from a family member.

Elsewhere, Halifax has reduced a number of rates by up to 0.3 per cent and is sitting pretty at the top of the tree in a few areas. It has a two-year tracker at 1.24 per cent, a two-year fix at 1.39 per cent and a five-year fix from 2.24 per cent.

Accord has withdrawn all its first-time buyer products at 90 per cent and 95 per cent LTV, and increased a few products a touch, while Santander is the latest lender to join the Help to Buy London scheme. Nationwide has released a handy guide to its HM Revenue and Customs tax calculation and tax year overview requirements.

Meanwhile, the MCD continues to have an effect and BM Solutions has outlined its new income requirement fields. It will now look at household income to support any underlying residential mortgage. It has also rather nicely extended its acceptable AST criteria and will accept longer-term tenancies up to three years.

Fleet Mortgages has reduced some of its rates and now has a two-year fix with a 1 per cent fee available from 2.89 per cent and a limited company product from 3.98 per cent as a lifetime tracker with a 1.5 per cent fee.

Finally, it was interesting to hear the FCA is going to look at how regulation could be holding back digital and mobile innovation in financial services. The future is coming and we need to make the most of it.

Andrew Montlake is director at Coreco