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Market Watch: The drugs don’t work

Andrew Montlake-CorecoThis month’s edition of Market Watch comes with a privacy policy and the option to unsubscribe at any time. Your name will not be passed on to a dodgy third party and I promise not to track you at home to spout swap rates when you least expect it. I do not want to lose you, though; so to keep your interest, the first person to work out the secret code contained in the column wins a bottle of wine.

It is all go in Europe again as the sceptics rub their hands in glee. Just when you thought the eurozone looked ok (remember Greece?), Italy has decided it has been quiet for long enough, plunging into fresh political chaos. As a national paper pointed out: “It is starting to look very 2011.”

Could ‘Quitaly’ be back on the cards, depending on who, if anyone, has enough power to form a government? Things like this tend to be contagious, so we will watch with interest.

In the UK, meanwhile, everything on the economic front has been pretty subdued. Following a wave of pretty unspectacular data and a drop in the rate of inflation to 2.4 per cent, it was ultimately no surprise to see the Bank of England pull back from its May rate rise talk.

Although some members of the bank are keen to emphasise that we should prepare for an increase anyway, it seems more and more unlikely in the near future. Part of the issue is that we have been in a low-rate environment for so long that they are no longer stimulating much; they have stymied productivity, weakened sterling and inflated assets such as property too far.

I remember writing years ago that our problem will always be when we try to come off the medicine we have had to take to survive the crises. And here we are. Another example is Help to Buy. Surely it will be extended at the behest of builders everywhere? The difficulty is coming off the drugs without adverse reactions. While a major house price correction may be prayed for by some, it could be too much to take economically.

Elsewhere in the housing market, the big news this week has focused on a top-10 lender: the Bank of Mum and Dad. Apparently, parental help has become more of an important factor than ever before, with Legal & General reporting that one in four transactions this year will depend on it. This equates to a whopping £5.7bn given by parents to fund around £82bn-worth of property over 316,000 transactions. That is some number.

Interestingly, however, the average contribution is expected to drop to £18,000 this year from £21,600 in 2017, which could be a reflection of a slowdown in the market and a more general squeeze on savings.

This has always been a fascinating subject and views vary on whether parents should just refuse and clam up, forcing the property market to correct itself. We all know that, as an asset class, it is very toppy at the moment. Although London prices have finally eased and nationwide growth has slowed, a rate of around 2 per cent growth is still expected overall. That said, as far as mortgage lending is concerned, it feels difficult to push through a deal at the moment.

UK Finance reports gross mortgage lending was up 13.3 per cent on April last year, with the total number of approvals also up 11 per cent. Just think how good the numbers could have been if all lenders had efficient systems and more streamlined customer journeys.

In the markets, three-month Libor has drifted down by quite a margin to 0.61 per cent, while swap rates have continued to fall on the back of the Bank of England meeting and economic data.

  • 2-year money is down 0.14% at 0.99%
  • 3-year money is down 0.13% at 1.13%
  • 5-year money is down 0.11% at 1.32%
  • 10-year money is down 0.10% at 1.57%

In the zany world of mortgage products, there have been a few changes worth noting, with some lenders, such as Sainsbury’s Bank, taking advantage of a dip in swap rates to reduce pricing again. Sainsbury’s has also become the latest mainstream lender to launch a buy-to-let proposition, with rates starting from 1.49 per cent.

Santander has launched some decent key account exclusives, too, while Virgin Money has a new range of seven-year fixes from 2.37 per cent and 10-year fixes from 2.59 per cent. TMW has introduced a dedicated large portfolio mortgage range and has, rather lovingly, increased procuration fees a smidge for it.

Meanwhile, Principality Building Society is the latest lender to launch into the English Help to Buy scheme, while the rather brilliant Digital Mortgages from Atom Bank has introduced a wave of 95 per cent loan-to-value deals for first-time buyers.

In other news, Ami has released the results of its survey into every broker’s nightmare: free legals. Highlights include the fact that 82 per cent of brokers believe the service delivered by free legals is worse than a customer’s own choice of solicitor/conveyancer, and 71 per cent say they are experiencing issues and delays. Those are crazy high numbers.

Finally, I was delighted to see that Lloyds of London has joined the modern world in allowing men to go to work without a tie for the first time in 300 years. According to one worker, 10 years ago someone without a tie was the same as “wearing a yellow mankini”. This I have to disagree with; my mankini is far more comfortable than a tie.

Andrew Montlake is director at Coreco

Hero to Zero

Harry and Meghan. For a day, Britain was lovely and united again

Digital Mortgages from Atom Bank. Still doing good things at high LTVs

The FCA interim mortgage market study is good in parts but with some cause for concern

Many lenders’ IT systems still affect customer outcomes and service

GDP bloomin’ R – particularly those taking full advantage to send more emails

General industry treatment of mental health – especially in males

What Really Grinds My Gears?

It is a tricky one, this. Especially from me – someone who is not afraid of voicing an opinion or two. It is just that social media is not the right place to air dirty laundry.

We have a duty to our industry not to play into the hands of those who say it is broken, or cannot be trusted, just for a bit of PR – whether it is over-the-top assassination of a lender, a person or another industry organisation. If the public and regulators see us as dysfunctional and not unified, how are they likely to respond? Splitting our voice reduces our effectiveness, especially when most of us just want to get on and do a good job for our clients.

We have to be mindful of this when we comment and advertise. The recent Which? advert insinuating that some brokers choose lenders by commission payment rather than what is best for a consumer is at best ill-judged, patently untrue and, in the midst of an FCA competition review, downright irresponsible.

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