Commitment can conjure up a variety of images in our minds and mean different things to different people. For instance, the definition of a ‘committed challenge’ on the football field was made all the more ambiguous by Zinedine Zidane upping the ante in the recent World Cup Final.
This weekend I have witnessed two successive weddings with both couples committing their eternal love for each other. However, you could sense at the receptions that one or two of their friends were going to make their commitment last until they awoke the next morning in horror.
In our business things get more serious and, at times, more fickle, with lenders invariably baring the brunt from all sides. Historically, brokers would support Halifax one minute for its ‘hot two-year fix’, then Abbey the next. In fairness, however, they were probably doing the right thing by their customers. Then of course the coincidence of early repayment charges (ERCs) with the benefit period of the product came about. This perpetuated ‘broken loyalty’ as customers were again rightly advised to shop around.
Lenders that introduced mortgages have traditionally had a much lower success rate into associated general insurance sales (in fact the penetration rate is higher on daytime TV). Commitment was expected because it was a case of, ‘we’ve given you a mortgage, surely the least you can do is sign up for our insurances?’ Brokers initially trod carefully here as many believed, rightly or wrongly, that the lender was more likely to opt for the mortgage.
However this contrived method of ensuring commitment was doomed to failure as brokers were being offered commission elsewhere; ‘hey presto’, the lenders had to start paying. At this point in time they are paying procuration fees to keep the mortgages with them as well now. You see in business, often, money talks louder than commitment.
The commitment of lenders’ staff is also being tested like never before in 2006, with new entrants positioning their offices in previously unchallenged catchment areas. In an attempt to get their new business off the blocks faster than Brandon Routh in costume, off-site staff such as business development managers and underwriters based in packager’s offices can operate with various lenders without any change to their current daily routine. With competition fierce, money is ranting rather than plain talking.
The new entrants have resulted in lenders trying to test packagers’ resolve with offers of shares in securisation profits and money for panel appointment rather than depend on the traditional methods to try and break existing committed allegiances.
In short it is becoming increasingly apparent that commitment comes at a price.
Mainstream
Northern Rock has put a withdrawal watch on its popular two and one-and-a half year fixes at 4.79 per cent and 4.49 per cent with £695 completion fees respectively.
Dunfermline BS has been very bold recently with its fixed rates and 4.69 per cent fixed to 30/9/08 with £699 completion fee typifies this. Be careful though; the loan-to-value (LTV) reduces from 95 per cent in Scotland to 80 per cent for England and Wales.
Nationwide BS’s remortgage fix at 4.79 per cent for two years has free valuation and legal service. Abbey has similar remortgage incentives on its two year tracker at 4.37 per cent.
Nationwide BS has also altered its ERC charges to a flat percentage across the benefit period rather than tapered steps.
Woolwich has launched a new marketing theme on its website – chocolate body paint. It could get a bit messy in this heat wave.
Self-cert
UCB Home Loans now offers free valuation across its range; this really helps secure business. It has also had the foresight to include a process for packagers (including Mortgage Times) to offer this as well. As you might expect, being part of the Nationwide stable it has simultaneously looked at its ERC strategy and has moved to ‘percentage of the amount redeemed’ rather than monthly interest.
Buy-to-let
Mortgage Trust has launched a cracker for rental calculation, 4.55 per cent fixed to 30/9/07 followed by 5.10 per cent fixed to 30/9/08. The rental calculation is 125 per cent at 4.55 per cent.
UCB Home Loans has also introduced free valuation on its buy-to-let mortgage products.
CHL Mortgages has introduced two products with 115 per cent rental cover to take advantage of its recent increase to 90 per cent LTV. It has also added a remortgage product with free valuation and legals to 85 per cent LTV. Its criteria is more specific, including the exact qualifications for letting agents and estate agents it expects when the valuer obtains rental comparable evidence.
Chelsea Building Society has reduced its calculation to 115 per cent. This has become the benchmark in recent months – a drop from the previously established 125 per cent.
Adverse
Kensington Mortgages has re-opened two-year products on its Simple Choices Range under the new heading of ‘Simple Choices Plus’.
Rooftop Mortgages reset its LIBOR at 4.63 per cent.
Preferred Mortgages has made a specific play for the shared ownership market by expanding its mortgage lending policy to encompass virtually all permutations of this unnecessarily complex market.
