Acouple of things have caught my eye this week in terms of mortgage lending institutions. First of all we have the British Banking Association, (BBA), defending the large gaps between LIBOR rates and the product pricing we are seeing, and we also have a Which report on what 2000 of their members say are the best and worst mortgage lenders.
As far as 3 month LIBOR is concerned this was always the reason that lenders used for not lending during the height of the credit crunch when it was artificially high. Now, according to Moneyfacts, “Three-month Libor is at 0.55 per cent, while the average two-year tracker rate is 3.76 per cent. Two-year swaps, which lenders use to fund fixed-rate mortgages, are at 1.84 per cent, compared with the average two-year fixed-rate deal at 5.13 per cent”.
Now regular readers will know that I understand this is not quite so simple any more, as lenders have to take into account toughening capital adequacy requirements, increasing costs of funds based on perceived risks and the increased costs of attracting savers. In fact there is no doubt that the relationship between LIBOR and funding in its most simplistic sense has changed, perhaps for good like many other economic theories we have seemed to rely on.
However, I still believe there is some leeway and whilst some banks can obtain funds at cheaper rates than others, see the latest HSBC, Abbey and Woolwich products, I am sure more can be done if they really wanted to. In a report last week lack of demand was highlighted for a reduction in lending, but in truth I just do not buy that as demand is not as weak as we are led to believe.
Some positive news on the funding front was the first European securitisation deal for more than a year taking place, with Lloyds issuing an AAA rated mortgage-backed bond equivalent to £4 billion!
As Robert Plehn, head of structured securitisation at Lloyds Banking Group, said “This offer was significantly oversubscribed…we believe we have taken an important step towards helping reopen the European securitisation market.”
This could indeed be a very significant development.
So what of the best and worst mortgage lenders according to Which? In the top 5 for the best we have First Direct, One Account, Coventry, Britannia and the lovely Nationwide. Well done to those with the top 3 all scoring 5 out of 5 for customer service. HSBC as expected did well on rate but scored relatively poorly on customer service and came in 7th out of 17.
So the 3 worst offenders who must try harder? Halifax, Northern Rock and Abbey. In reality only 2000 people were asked and the results were quite close, but it is interesting to see these reports and illustrates to me how using a mortgage broker can help you bypass much of the service issues those going direct tend to experience, as some of those who scored lower on service we do not seem to have an issue with at all.