We are getting to the time of the year when lenders start thinking about building up the new business pipeline so they can start the New Year with a healthy number of completions banked. This then takes the pressure off sales, rather than having that horrible feeling of having to play ‘catch-up’ before the industry wakes up again after the Christmas and New Year festivities.
Virtually every mortgage lender I’ve spoken to predicts a two or three-fold increase on their 2006 total; when you’re talking billions this is hugely significant. I appreciate the rising house values will inevitably lead to applicants borrowing more but I can’t help pondering where the rest of these increases are going to come from.
Sure, many lenders have diversified into different markets – buy-to-lets, for one, are established and Individual Voluntary Arrangements (IVAs) are booming. However, technological advantages must even themselves out as more lenders will act together. Retention products will also have an equalising effect as more players enter this arena.
Take the most significant news in the market in recent weeks – the Nationwide’s takeover of Portman. Fresh in the minds for Portman will be its own move for Lambeth BS, which effectively prevented Lambeth generating new mortgages for the last quarter. A further impact of sales will be the consultation period during which they will decide to divide the other two brands this takeover brings together – UCB Home Loans and The Mortgage Works.
If we look at recent history, RBS Intermediary Partners struggled to get their brand formula right first time, with brokers voting with their feet and forcing First Active to offer buy-to-lets again, rather than its intended sole outlet NatWest. This unquestionably lost the Group business before the decision was reversed.
Another example is Lehman Brothers, who has seemingly found it difficult to support all three of its bands (in my opinion Southern Pacific Mortgage Limited (SPML) apparently fairing the best) while figuring out its individual strategies.
2007 is sure to bring more consolidation, so maybe destabilisation is the opportunity other lenders seek to aid their quest to originate £6bn in lending, up from £2bn (which are typically the figures quoted to me). What makes me smile is that many of the lenders boasting such claims are the traditional specialist ones. It’s no secret that high-street lenders are planning on offering near-prime products next year – surely the growth market. Balance sheet lenders can choose to trump securitisation models on rate if they choose, pushing the specialist lenders down the risk curve – more inclusive for borrowers perhaps, but it remains doubtful that niches will be able to add £4bn to the bottom line; more like putting their existing £2bn under attack rather than writing more.
I hope I’m wrong because if every lender adds a few billion next year, we, the intermediaries, will celebrate. But I can’t help but think there are going to be some unfortunate casualties along the way – the sums just don’t appear to add up.
Mainstream
Northern Rock has a 4.39 per cent fixed for 18 months with a £995 fee. Portman is priced at 4.75 per cent for two years with a £499 fee.
Two-year variable based with remortgage package: Bank of Scotland 4.29 per cent with £1,499 fee. Nationwide BS 4.62 per cent with a £499 fee.
I think the Derbyshire’s recent advertising claiming a ‘NEW free legals remortgage’ is a tad rich as the product carries a 1.5 per cent completion fee. Could this be cross-subsidy? Please don’t insult our intelligence.
Cheltenham and Gloucester now allows a single identification document rather than two.
Buy-to-let
Good news – there has been a reduction in the rental calculations for the following lenders: SPML and Preferred Mortgages – 110 per cent on two-year fixed rates; Woolwich – 125 per cent at 5 per cent; and Freedom Lending – 120 per cent at payrate.
edeus has introduced a couple of new angles. For instance the portfolio landlord with 28 properties each with a mortgage of under £350,000, can now gear the entire lot up to 90 per cent loan-to-value (LTV), or £350,000. Its self-cert of earned income product allows similar lender products to be on other properties in the background.
BM Solutions’ indexing of products with a three digit code is helpful in terms of identification and I wish more lenders would adopt similar approaches – the latest range includes a two-year tracker at 4.75 per cent without early repayment charges (ERCs) – which cracked me up as the indexing has thrown out the code ‘COD’.
Self-cert
First National is the latest lender to include a 95 per cent LTV self-cert self-employed product. The risk category is near-prime plus.
Adverse
Future Mortgages has increased its income multiples to 4.5 plus one or 3.5 times joint.
SPML has reduced the minimum trading period on self-cert to six months. It also allows right-to-buy properties to be remortgaged up to 90 per cent LTV. And usefully, it will now permit married couples to apply in single names – this may mean a lower risk category can apply.
Preferred Mortgages has extended its range by offering two-year discounts on the majority of its products.
First National is offering 100 per cent LTV on three of its lightest plans, importantly encompassing first-time buyers. We have already had several processed through Mortgage Times so it bodes well.
