It seems a lifetime ago that television smash hit Batman graced our screens. Lifting phrases such as ‘Kapow!’ directly from the comic strip, and adding quips such as ‘Holy haberdashery, Batman!’ after every sentence, it inspired my friends and I to re-enact their exploits.
Despite the deadly duo’s strength – unashamedly on display with their tight-fitting costumes – they (particularly Robin) were seemingly unable to cope with the bazooka-type gun which was fired by the selected baddie of the week, out of which flew a net with tiny round weights in each corner. It was the equivalent of being hit by a locomotive at full pelt. Try as he might, the boy wonder was helpless.
In our industry we too have been hit by an impregnable net. It is the net referred to in the context of net lending. What has happened is the fallout from the credit crunch. Six months on, the balance sheet boys have seen us witness excellent retention levels. This is pleasing for them, but slows the market as new business is no longer essential.
So why is retention up? To pardon the pun, the net affect is customers are rooted to the spot. Frozen and scared to consider or unable to find alternatives. Some are prudently refusing to consider trading up with a new purchase as job stability, particularly in the City, is uncertain and bonuses are flattening out.
This is not the case in all instances, and indeed remortgages are up in the early part of this year as brokers got client visits ahead of plan to keep the wolf from the door, but potentially leaving a void in the coming months.
However, if I cast myself as an arch villain, the immediate outlook is grim. The Bank of England has just one button to press to get things going again.
Picture this – it is approaching the end of the episode. Batgirl is roped to a conveyer belt. In the corner of the room is the flashing red button. Time is running out, and Batman is still across town beating 10 bells out of the Riddler. In a seemingly impossible situation, the window smashes and in swings Batman.
Of course, it’s Alfred (or Mervyn King) the trusted butler, dressed in a spare Batman suit. He hits the buzzer releasing Batgirl and dropping interest rates by 50 basis points. Huge relief. Well maybe not – sure Batgirl is free, but what of the intermediary?
Unlike in previous instances, who is it that benefits from a rate drop the most? Most likely it’s the existing borrowers who have their underlying rates directly linked.
New rates offered by lenders will be adjusted to neutralise the Bank of England reduction because, quite simply, they do not have the money to lend anyone at the moment. In real terms, this puts more borrowers out of the reach of intermediaries as remortgages look increasingly expensive.
Ironically today then, I plead for lenders to pare back their criteria. To try their best to eke the money they have to lend out across the year. This will allow us to budget and make our businesses more sustainable.
I ask them to continue with the generous savings offers at the moment, however painful, to free up more capital.
I also pray for mortgage-backed securities to continue to perform so investor confidence can return, as we have collectively created a demand beyond the natural appetite of the balance sheet boys.
If these things do not happen, we might reach quarter four without the inclination to lend or indeed the funds left, and we end be up in holy smoke, Batman.
Mainstream
Abbey has reviewed its new build lending policy. Houses are subject to a maximum of 85 per cent loan-to-value (LTV) and flats 75 per cent LTV. Interest only is now limited to 90 per cent LTV, and 85 per cent LTV without a defined repayment vehicle.
Bank of Ireland (BOI) has extended its 1st Start product to Scotland.
Cheltenham & Gloucester (C&G) has withdrawn its full term trackers.
Intelligent Finance will now concentrate solely on offset products.
Buy-to-let
BOI now accepts Houses in Multiple Occupancy that do not legally require a licence, and has also extended the criteria to Northern Ireland.
C&G, Heritable Bank and CHL Mortgages have reduced LTVs to 80 per cent. The latter has also temporarily pulled its products.
Mortgages plc has pulled out of the sector.
The Mortgage Business has withdrawn the facility to re-draw overpayments.
Self-cert
Chelsea’s minimum self-employed trading period has increased to 12 months.
First National has increased its self-cert loadings and now credit scores all cases over 60 per cent LTV.
Future Mortgages and Mortgage Express have restricted borrowing to 85 per cent LTV.
UCB Homeloans no longer offers a solution for first-time buyers.
Adverse
Accord Mortgages has amended its maximum loan to £500,000 and removed its trackers.
Amber Homeloans, Scarborough Specialist Mortgages, Salt Finance, West Bromwich for Intermediaries, Northern Rock and C&G have removed their current range of products and are unlikely to offer any new business deals for the foreseeable future.
Chelsea no longer lends on ex-local authority flats.
Infinity Mortgages has launched an amenable medium adverse product.
