Mortgage News & Information - Issue 41, 19 July 2011

Market View

If you believe everything you read in the papers you would be forgiven for thinking that there is not much point in applying for a mortgage at the moment because it is all too difficult.

The good news is that this is actually not true. There is no mortgage shortage and lenders actually have begun to compete for business by reducing their rates.

In fact, according to a report by Moneyfacts, mortgage rates are now the lowest they have been for 23 years, not only due to the expectation that rates will now not change this year, but also because lenders are finding it cheaper to raise funds in the financial markets and have more of an appetite to compete.

Apart from these rate reductions, the interesting thing is the amount of innovation that has re-appeared in the market, with lenders looking to assist on the more difficult transactions.

Even at the higher loan-to-value levels, where we have seen a dramatic increase in products available up to 90% LTV, lenders are now more often than not looking to assist.

Affordability calculations and credit scores have both become more realistic rather than just lax, helping to ensure that the right borrowers are matched with the right loan amounts.

Of course in this new era certain people will still struggle, those looking to stretch income to levels that are just too high to justify and those without at least a 10% deposit. However time taken to save for a deposit and ensure that the mortgage is affordable is no bad thing.

The biggest real change is around interest-only. No longer are those who can only afford the loan on an interest-only basis, with no thought about how they are going to pay the loan back, are able to do so. Again, this is no bad thing.

The above does not however, constitute a full scale mortgage crisis. More and more we are seeing loans go through in the more difficult situations, albeit priced to reflect the level risk.

Whilst things are still tough, they are nowhere near as tough as the press would have you believe.

Lenders are lending and mortgages are available; and at exceptionally low rates.

3-month Libor has increased slightly to 0.83%

Lender News

Northern Rock has cut rates by up to 0.18 basis points on its Intermediary Exclusive product range.

It also offers Fee Saver Option (FSO) products for borrowers who are looking to keep their fee costs as low as possible.

Northern Rock's two-year fixed rates with no product fee will now start from 3.25% for both purchase and remortgage customers.

Three-year fixed rates with no product fee will now be available at 3.64% for both purchase and remortgage customers.

It also still offers an exclusive two-year fixed rate at 2.89% with £995 product fee.

Santander is moving its call centres back to the UK.

It is returning all of its Indian call centres to the UK so that all retail banking customers ringing the bank will have their call answered by a UK-based employee, it says.

The bank has been subject to widespread criticism recently over its service levels.

Abbey outsourced its call centre operations in 2003 to two centres in India - one in Bangalore and one in Pune. All calls handled by these centres will now be dealt with by staff based in Glasgow, Leicester and Liverpool. 

Santander has hired an additional 500 UK staff to handle the estimated 1.5 million calls each month. In total, Santander's UK call centres employ 2,500 staff.

The Leeds Building Society has made further reductions on two and three-year fixed rate products.

Rates have been reduced by up to 0.3 basis points on the two-year products, and by 0.4% across three-year fixed rate mortgages.

The three-year fixed rates have all been reduced by 0.4 percentage points. A three-year fixed rate of 3.75% is available up to 75% LTV, at 4.05% up to 80% LTV and at 4.35% up to 85% LTV.

The Society has also cut two-year fixed rates, available up to 75% LTV and 85% LTV, by 0.3 basis points to new rates of 3.40% and 4.05% respectively. The version available up to 80% LTV has been reduced from 3.79% to 3.64%.

Furthermore, all these offers have no higher lending charge and 10% capital repayments are allowed each year without penalty. The Society has also launched fees assisted versions of these products, with free valuations and legal services for standard re-mortgages.