Mortgage Market Watch 6

There I was pondering what to write this week and all of a sudden we seem to have been inundated with some stat-tastic facts and figures from the Office of National Statistics and the good ol’ CML, as well as a controversial policy change from a major lender.

But first the headlines, Swaps have risen slightly, apart from 1 year money, whilst LIBOR has remained steady.

Three-month LIBOR is still at 1.08%.

1-year money is down 0.01% at 0.965%
2-year money is up 0.01% at 1.24%
3-year money is up 0.04% at 1.31%
5-year money is up 0.09% at 1.615%

In terms of statistics the CML have highlighted the fact that repossessions are at their lowest level since 2007, with 36,200 in 2011. Whilst this is of course good news we all know that many people are only hanging on because of the low interest rate environment, which given the latest Base Rate announcement and general economic malaise is expected to continue for a while.

The real question is whether or not the economy can repair itself in time in terms of employment and wage increases at the same time as rates eventually start rising again, as well as lenders looking after their existing customers and providing those that cannot remortgage affordable fixed rates to protect themselves. If not, expect a sharp rise in these figures.

The CML also reported that Buy-To-Let has continued its upward trajectory as expected with Buy-To-Let lending now at 11% of total gross mortgage lending in the 4th quarter of 2011.

Meanwhile, a couple of reports have suggested that the UK economy is actually doing better than many thought. The ONS have shown that there was stronger than expected industrial production in recent months and there was also a boost with The Markit/CIPS Purchasing Managers’ Index (PMI) for services rising in January.

This was the sector’s fastest expansion in 10 months and flew in the face of those forecasting a further slowdown.

In terms of mortgage products, most changes have been overshadowed by Santander’s announcement around Interest Only and general criteria tweaks. Anything above 50% LTV will now only be accepted on a repayment basis, whilst any late payments or defaults for whatever reason will be a straight decline.

I am sure all of us understand the need to move away from interest only for certain customers and the pressure lenders have on balancing their back-book which may be too interest-only biased, these changes seem to be a little over the top, especially when Santander already had a sensible Interest Only policy.

Whilst not just alienating high net worth borrowers where interest only is a legitimate repayment method, those looking to remortgage could have an issue when they find, for example, the ISA that they have diligently paid into is no longer suitable. This can create another tranche of mortgage prisoners.

For an important lender like Santander to make these changes is a big move and it will be interesting to see if other lenders follow suit.

As Abbey at least gave the industry some notice of the changes, they have escaped villain of the week by the skin of their teeth due to an even more disappointing announcement below!

Finally I’d like to thank Nigel “Stocko” Stockton for his kind comments in his column last week. Unfortunately for him I am still very much writing business and am enjoying the competition in our market!

Hero

Hero’s of the week are any lenders who do not feel pressured to change already sensible interest only policies. At 75% LTV with a properly thought-out repayment plan there is still an important place for this type of lending.

Villain

The decision by the FSA to delay the introduction of individual registration is a real shame and at this rate England  will have won the World Cup in Brazil under Harry Redknapp before we see its’ implementation. If the FSA need help with a system I am sure the industry would be happy to assist.

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