Any broker can tell you in seconds what the cheapest rate in the market is and, at various times, this will vary between a direct to lender product or a broker only deal, but this misses the point. Can this product actually be attained and is it the best to fit your personal circumstances?

Every day there are tales of woe from all areas of the consumer market about people who bought the cheapest products which turned out to have a sting in the tail and cost a lot more in the long run.

A good independent, professional mortgage broker, or adviser as I prefer to be called, provides a service that a borrower cannot obtain direct from a lender and certainly not from a comparison site, neither of which actually advise on all the best products in the market. A decent broker will talk about direct deals as part of their overall analysis.

The key issue is around advice. For those who want to take out the biggest loan they are ever likely to have without obtaining any kind of advice then the internet is a wealth of information. However, the cheapest product does not take into account the myriad of personal requirements and future flexibilities a client may need.

Therefore 1^st Time Buyers, who may need a hand to hold throughout the process, should always look to obtain proper advice.

For high net worth individuals also, the whole range of highly competitive products, (sometimes market leading), available through Private Banks, who offer a blank sheet of paper approach to underwriting, remain the preserve of the more respected broker.

For those who are generally time poor, or need to move quickly, the service a broker provides can take the pain and hassle out of the process and ensure that deadlines are met without you breaking sweat.

There are two key words here, independence and advice. An independent broker will be able to look at every product on the market as well as some that are only available through the mortgage broking market.

A lender can only talk about their own products and many will not provide perhaps the most important bit, advice. A mortgage is the largest commitment that most people will ever make and to do this without taking full advice and comparing all the options available is a risky game, especially with all the small print and fees that surround mortgage products.

A small fee paid to a broker can still save thousands of pounds over the term of a mortgage or avoid costly penalties in the future.

Service is also key. Securing the property of your dreams often means moving quickly and many larger brokers have immediate access to the decision makers, rather than having to go through the layers of process that walking into a branch often entails. This means that any potential issues can often be anticipated and the whole process smoothed.

Helping a busy client to complete the mortgage application, prepare all the documentation and liaise with the lender, valuer, estate agent and solicitor to ensure deadlines are hit is a time consuming process and this is all part of the brokers service.

Knowing which lenders are able to proceed quickly and which ones have a paperwork backlog can be the difference to actually getting the property you want or losing out.

There is also the aftercare service, not only looking at how clients can ensure they are able to both repay the loan and protect their new home, but advising them each time their product comes up for renewal or their circumstances change mid-term.

There are not many professional services left that provide all this for a relatively modicum fee when compared to the transactional approach by Estate Agents, Solicitors and, let us not forget, the banks as well.

The days of a broker simply looking down a list of products, pointing at the cheapest and pocketing the inflated commissions are thankfully long gone. As mortgage criteria toughens, professional mortgage advisers who provide genuine independent advice and a proper relationship based service are, and always will be, in demand.

According to the report, “Average asking prices rose 2.9 per cent between March and April … £1,327 more than the last peak in May 2008 when the average was £242,410.” It went on to say that “the average is being skewed by London’s irrepressible housing market.”

Meanwhile, London apart, the usual House Price Indices, (whatever they are worth), suggest prices may actually be falling, albeit slightly. Therefore the gap between realistic actual prices and what a vendor wants for their property seems to be growing once more!

Demand in London, however, remains high for decent property as evidenced by the amount of sealed bids we are seeing.

As supply and demand is one of the only economic theories left with any credence it therefore seems that despite withering economic conditions house prices in the high demand areas will hold their value at least. We stand by our 3% growth prediction at present!

The difficulty all this brings is that this is happening at a time when some of the major mortgage lenders seem to be admitting privately, that they could be lending out less than last year, with the cost of funding increasing and the availability of cash to lend out being constrained.

We have recently seen another rash of interest rate rises from many of the major lenders, with fixed rates especially edging up again.

This looks set to continue even though Bank Base Rate is staying static. A recent report stated that the average two year fixed rate has risen to 4.15% up from 3.82% in October 2011, whilst five year fixed rates hit a low in January with an average rate of 4.57% but this has crept up to 4.72%.

The average rate for two-year trackers now stands at 3.63% up from its lowest level in August 2011 at 3.37%.

In terms of reasons for this rise, lenders point to the cost of funds, the cost of getting savers in, the  cost of borrowing to lend, capital adequacy and levels of competition. Also important however, are service levels and plain old profit, which all play a part when there is a limited supply to lend.

The phrases “Mortgage Prisoners” and “Mortgage Time Bomb” have appeared on the front pages, which all seems very dramatic and may have you wondering whether this means that no-one can get a loan these days.

As ever, this is far too simplistic. Whilst it is true that lenders have tightened up their criteria in respect of interest only loans, affordability etc, there are fundamental differences to the dark days of 2008.

Much of the tightening up on the high street has been countered by the growing number of smaller, niche lenders, mainly building societies, who are able to look at applicants in the old fashioned way – blank sheet of paper and a human underwriter. Together with a more forward thinking Private Bank sector, these lenders are actively helping borrowers such as the self-employed and high net worth individuals.

When all this is taken together, these issues mean that it is more important than ever for buyers to take advice and have their finances in place at the earliest possible opportunity, not just to prove to the vendors that they are serious and can move quickly, but also to ensure they are not caught out by sudden rate rises or criteria changes by the lender.

Whilst much was all as expected things did seem to get rather interesting from a property perspective when the subject of stamp duty was broached, where the real surprise was lurking.

The 7% on properties above £2m was widely expected, but the tax on those purchasing via a company was the big surprise, at a whopping 15% with the promise of further “measures”.

As for the basics this represents a big step in the Chancellors move from taxing income to taxing wealth, with the “fiscally neutral” budget paving the way for a reduction in the 50p tax rate to be financed above and beyond by the Stamp Duty changes.

I can’t help feeling however that this was an opportunity missed to fundamentally overhaul Stamp Duty properly. By charging Stamp Duty in a similar way to income tax this could have worked in a much fairer way, helping those buying at the lower end such as First Time buyers with a lower rate and gradually tierring upwards to potentially an even higher rate, even 10%, at the top end. This way both ends of the spectrum would be more willing and able to pay.

Just adding a further “slab” and charging 7% on the whole amount will only serve to encourage Stamp Duty Mitigation Schemes and avoidance measures however tough the Chancellors words.

Either way, in retrospect this is a better suggestion than the dreaded Mansion Tax which could target the wrong people entirely!

The main issue, as I glance down to see my client frantically calling me who is purchasing at just over £2 million, is that in setting the deadline to midnight tonight to exchange, there will be those who have incurred substantial expense based on one idea of costs, who will have to suddenly find a load more cash to actually complete.

This seems crazy to me and even a months deadline would have avoided issues. People underestimate how much the wealthy help the economy and driving them away suddenly is not the answer.

The big move is where properties bought in a company name is concerned. Setting the rate at 15% for properties bought in this manner is actually a clever move and should kill off this practice stone dead.

However, the devil is in the detail and many foreign buyers purchase properties for investment purposes rather than to live in, so it is unclear if these will escape or not. I sense a loophole!

It also does not address those properties already held in company names, although this will be consulted on, with Capital Gains Tax one change mentioned. How the Chancellor proposes to charge Companies who are purchasing the share capital of other companies that hold a single property remains to be seen.

Anyway, I am properly budgetted out now so glad to get back to the day job, whatever that actually is…

As usual by the time the actual speech comes round, most of the measures to be announced are already in the public domain, save the one big “surprise” measure that is saved for dramatic effect.

This budget on the face of it could be a dull affair as, let’s be honest, the Chancellor has no money to really play with, but for me that is exactly why it will be more interesting than usual.

Tax measures are under particular scrutiny, with areas such as Stamp Duty, the 50p tax rate, initial tax free allowances, tax avoidance measures and corporation tax all up for debate.

In the property market the biggest issue is where Stamp Duty is concerned and the Chancellor has made no bones about “coming down like a tonne of bricks” on those wealthy individuals buying properties in company names to avoid Stamp Duty. So expect a major headline pleasing measure to try to clamp down on this.

At the top end of the market this has been a popular method of transacting for a while, where purchasers either buy the property in an offshore Ltd company name or simply buy the share capital of a company that already owns the property asset.

This practice is now firmly in the Chancellor’s sights and he was very clear in an interview yesterday that this should be changed on “homes that people live in”. Whether this will leave investment properties free to escape whatever the new rules look like remains to be seen however, which could in turn present another little loophole to be exploited?

It is a shame that it looks like nothing more will be done to help 1st Time Buyers where Stamp Duty is concerned, but we can but hope. Despite the fact that there are claims that the moratorium for 1st Timers has not generated the interest expected, I suspect this is more to do with lending policies and availability of stock than anything else.

It strikes me that there is an opportunity now that does not come around very often to do something different or radical and changing the very nature of stamp duty is one such opportunity. Reworking this tax and charging it in a similar way to income tax seems far more sensible and would allow for different rates to be set in a way that perhaps reflects today’s values more accurately.

Of course the Chancellor will go on about how great NewBuy is, (which is not a bad idea and will help a few people and support builders), as well as the new Right To Buy moves, (which seems an iffy idea when the UK’s social housing stock is so low and doesn’t really solve any issues), but it remains to be seen as to whether there will be anything else of real substance to assist the housing market.

Of course there is also the prospect of a highly debated Mansion Tax on high value properties as well. This would not be popular in Tory enclaves and the difficulty here is actually assessing whether someone is actually wealthy or that they just happen to be living in a property that has grown in value over the years or a family highly geared desperate for the space and access to decent schools.

As ever the devil will be in the detail that follows after the speech, but there could be a lot more to this budget than initially meets the eye. After all, the Chancellor has a tough balancing act of Tory party faithful, Coalition partner politics, populist bashing of the rich, support for the business community, the so called “squeezed middle” and help for those who really need it.

Over to you George.

This is exactly what has now happened, with first NatWest increasing their rates for certain customers and then the UK’s biggest lender Halifax, grabbing all the headlines as they increase their Standard Variable Rate, (SVR) from 3.5% to 3.99%, affecting some 850,000 customers from 1st May 2012.

This change means an increase of around £40.80 per month per £100,000 on an interest only basis or £26.38 per £100,000 on a 25 year repayment.

This is a move that will no doubt stoke the fires of the anti-Lloyds, anti-banking, anti-business and anti-anything lobby, but as ever there are two sides to the story.

The biggest issue is of course that for many in the current environment, even a small rise in their monthly outgoings hurts in a disproportional manner than it may have done in more “normal” times. There are many who are only able to keep the wolf from the door because rates are low and a move such as this could lead to an increase in problems and arrears.

However, this is a harsh reality of life today and it should be remembered that at the heart of the matter, lenders are like any other business who need to sometimes make tough decisions to stay viable. Yes, profitability and balance sheet repair is undoubtedly a factor, but it is one of a few.

On the face of it, rates should be getting cheaper. After all since the start of the year LIBOR has fallen as have 1, 2, 3 and 5 year SWAP rates, yet we are still seeing lenders on the whole increasing their rates. There are clearly other forces at work.

In fact, the real cost of funds is still a complex affair for most lenders, with increasing regulation, tougher securitisation, an increasing cost of attracting savers and the thorny issue of capital adequacy.

To try to explain this Halifax provided the following examples:

“The cost of raising retail deposits to fund mortgages has risen considerably over the past few years. Throughout 2007, prior to tightening economic conditions, the average savings rate was 1.18% lower than the Bank of England base rate. However, since 2008, the average savings rate is 1.27% higher than the Bank of England base rate. This demonstrates the increased cost that banks must pay to attract retail deposits. Longer term funding costs are particularly high.”

“In addition, the cost of raising money in the senior unsecured and securitisation markets has increased. For example, in 2006, the cost to the Group of issuing a 4 year securitisation bond was 3 month LIBOR plus 0.11%. In July 2011, the Group issued a 4 year securitisation bond at the cost of 3 month LIBOR plus 1.45%. In February 2012, this increased to 3 month LIBOR plus 1.75% for a 3 year bond.”

As mentioned above, lending is also just one side of the proverbial seesaw, and whilst borrowers will be wailing at this move, many savers will be saying that this is about time and hopefully will be reflected in better savings rates. Although I would not hold your breath there!

Also, let’s face it, Halifax have just come in to line with other lenders and 3.99% is still on the competitive side compared to others. It should also be remembered that Halifax have not stopped lending, in fact far from it.

They are still the go to lender for many 1st Time Buyers, they support the new build industry and government initiatives and they have also bought out a cunning set of product transfers at reasonable rates to help existing clients who may face difficulties remortgaging away and need the protection of a fix.

For those who are able however, you can fix some way below this.

2 year fixed rates are available from 2.84%, (3.90% APR), whilst you can also fix for 3 years at 3.59%, (4.50% APR) or even 5 years at just 3.79%, (4.00% APR), all available with free legals and a free valuation for remortgages.

Alternatively, you could opt for a Base Rate Tracker from 2.74%, (3.90% APR) or a 3.44% tracker rate, (3.50% APR) with no early repayment charge.

What is very clear is that in this environment, independent advice is more important than ever and variable rates are beginning to live up to their name again; variable.

Three-month LIBOR is still at 1.08%.

1-year money is up 0.03% at 0.995%
2-year money is up 0.01% at 1.25%
3-year money is down 0.02% at 1.29%
5-year money is down 0.06% at 1.555%

As always I like to focus on the positive news and it was good to see inflation dropping to 3.6% and a dare I say almost optimistic speech by Merve King. Meanwhile, the Confederation of British Industry (CBI), reported that it believes that the UK will not fall into another recession and can expect to return to some modicum of growth once more, albeit very slight.

Whilst we do still have the perennial dangers lurking in the background as Greece gets closer to the expected end, (just default already and get on with it), plus the threats to the UK’s AAA status by Moody’s’, (where were you when we really needed you?), I remain cautiously optimistic as a whole.

Lloyds Banking Group are the latest to tighten up on their interest only requirements and you can expect other lenders to follow suit especially as lenders such as Accord have noticed a large uplift in interest-only applications following recent changes. It is difficult for any lender to remain in the “last man standing” position for too long and whilst ironically the FSA seem generally comfortable with the concept if used sensibly, interest only is facing it’s biggest challenge yet.

Whilst I personally disagree with lenders stance on this, before we decree the end of the mortgage market, (again), the reality is that this is just a further, though perhaps harsh, journey along the road to correcting the industry as a whole.

It does not mean that these lenders will not lend the same amounts they always did, it just means that borrowers will actually have to start repaying the loan back from day 1. For many, this is undoubtedly a good thing and with rents so high at the moment, the repayment costs are generally still comparable.

There seem to be a lot of gripes about down-valuations at the moment and a report in the FT by Esurv shows that there are some huge regional variations in this. Those in the North West are far more likely to be hit than those in London for instance.

I hope that rumours of valuers being told to be harsh and as difficult as possible are not true, but I would be interested to hear your experiences around the country on this.

Product wise there has been the usual plethora of changes with standouts being ING Direct reducing some rates which is welcome, Northern Rock increasing their cashback element to help First Time Buyers offset changes to stamp duty and well done to Woolwich for cutting some rates, cutting Buy-To-Let product fees and releasing their own version of Accords’ very popular track and fix mortgage.

Whilst the pricing on this may seem a touch out, they are more flexible as a lender than Accord and the Future Fix concept is a good one.

Hero

Hero of the week is AMI who have taken the brave move to strike out on their own. I have seen firsthand some of the excellent work they have done behind the scenes and as an industry we should get behind them and ensure their future. If your firm is not a member, now is a great time to start.

Villain

The Chancellor for refusing to see sense and continue with the Stamp Duty moratorium for First Time Buyers. Anything that helps those struggling to get onto the housing ladder should be kept going and I see no benefit in withdrawing this now.

First of all Lloyds Banking Group have followed the lead of Santander and changed their interest only criteria which means that many more buyers will have to look at a repayment mortgage. As mentioned last week however this is not the end of the world and, especially because of the low rates still available, when a repayment mortgage is compared to the cost of renting in most cases it still works out the more attractive option.

Secondly, those lenders that are doing good business with the best rates are starting to creak at the seams in terms of service. We have seen some delays from normally speedy lenders due to nothing more than having too much business to be able to effectively process quickly.

Whilst this does sound remarkable when there is still a low volume of transactions compared to the past, and especially when the press are in correctly saying that there are no mortgages around, this shows that demand is indeed there and seems to be growing each week.

With high competition for good properties and a quick valuation essential, it therefore means that applicants need to look even closer at the lenders current service levels rather than just following the cheapest rate. The lowest payment may be great, but not if the house of their dreams has already been sold to someone else.

But first the headlines, Swaps have risen slightly, apart from 1 year money, whilst LIBOR has remained steady.

Three-month LIBOR is still at 1.08%.

1-year money is down 0.01% at 0.965%
2-year money is up 0.01% at 1.24%
3-year money is up 0.04% at 1.31%
5-year money is up 0.09% at 1.615%

In terms of statistics the CML have highlighted the fact that repossessions are at their lowest level since 2007, with 36,200 in 2011. Whilst this is of course good news we all know that many people are only hanging on because of the low interest rate environment, which given the latest Base Rate announcement and general economic malaise is expected to continue for a while.

The real question is whether or not the economy can repair itself in time in terms of employment and wage increases at the same time as rates eventually start rising again, as well as lenders looking after their existing customers and providing those that cannot remortgage affordable fixed rates to protect themselves. If not, expect a sharp rise in these figures.

The CML also reported that Buy-To-Let has continued its upward trajectory as expected with Buy-To-Let lending now at 11% of total gross mortgage lending in the 4th quarter of 2011.

Meanwhile, a couple of reports have suggested that the UK economy is actually doing better than many thought. The ONS have shown that there was stronger than expected industrial production in recent months and there was also a boost with The Markit/CIPS Purchasing Managers’ Index (PMI) for services rising in January.

This was the sector’s fastest expansion in 10 months and flew in the face of those forecasting a further slowdown.

In terms of mortgage products, most changes have been overshadowed by Santander’s announcement around Interest Only and general criteria tweaks. Anything above 50% LTV will now only be accepted on a repayment basis, whilst any late payments or defaults for whatever reason will be a straight decline.

I am sure all of us understand the need to move away from interest only for certain customers and the pressure lenders have on balancing their back-book which may be too interest-only biased, these changes seem to be a little over the top, especially when Santander already had a sensible Interest Only policy.

Whilst not just alienating high net worth borrowers where interest only is a legitimate repayment method, those looking to remortgage could have an issue when they find, for example, the ISA that they have diligently paid into is no longer suitable. This can create another tranche of mortgage prisoners.

For an important lender like Santander to make these changes is a big move and it will be interesting to see if other lenders follow suit.

As Abbey at least gave the industry some notice of the changes, they have escaped villain of the week by the skin of their teeth due to an even more disappointing announcement below!

Finally I’d like to thank Nigel “Stocko” Stockton for his kind comments in his column last week. Unfortunately for him I am still very much writing business and am enjoying the competition in our market!

Hero

Hero’s of the week are any lenders who do not feel pressured to change already sensible interest only policies. At 75% LTV with a properly thought-out repayment plan there is still an important place for this type of lending.

Villain

The decision by the FSA to delay the introduction of individual registration is a real shame and at this rate England  will have won the World Cup in Brazil under Harry Redknapp before we see its’ implementation. If the FSA need help with a system I am sure the industry would be happy to assist.

Following on from one of my main themes, one of Mark Zuckerbergs’ quotes struck a particular chord, “a more open world will also encourage businesses to engage with their customers directly and authentically.”

In our own financial world, Swaps have fallen again this week whilst LIBOR has eased off a touch which will hopefully mean that lenders will indulge in some rate cutting with no notice next week! I know, wishful thinking.

Three-month LIBOR is down at 1.08%.

1-year money is down 0.03% at 0.975%
2-year money is down 0.03% at 1.23%
3-year money is down 0.05% at 1.27%
5-year money is down 0.08% at 1.525%

Your Shout

I have had a few people contact me wanting to raise the issue around bridging loans. It seems more brokers are seeing customers who have taken out a bridge with no exit strategy or miss-used as a way of obtaining a property without going through the usual due-diligence. This really has to stop and I would urge everyone to only deal with the professional bridging companies and report any incidences of miss-use.

Bridging loans are a very useful and important sector of the market if advised on correctly and the last thing our industry needs is to be lumped in with the cowboys that miss-sell these products.

Product News

Whilst we have seen another week of product withdrawals and rate rises with various states of notice, (Nationwide caused the most panic, naughty and unusual from them), there is still much to be cheerful of.

In particular we have seen a couple more lenders coming into the 95% LTV space, mainly supported by Building Societies. There are around a dozen products at this level now and recent additions include a decent product from Newcastle Building Society fixed for 2 years at 5.95%.

On the subject of smaller lenders I feel I should mention in particular Kent Reliance, Saffron, Harpenden and Furness, all of which are worth taking the time to look at as they are doing some good old-fashioned deals, i.e. human underwriting, in a sensible and timely manner.

Rate wise Furness have just released a good 3 year discount at 3.29% with no fees and penalties only within the first 2 years up to 80% LTV.

Service Please

One thing that is always important to brokers is levels of service from lenders so please let me know your experiences here we will identify some lenders that are good to use if you need a particularly speedy transaction. Last week Abbey produced a remortgage offer in a day, whilst an HSBC Premier customer was told he couldn’t even speak to someone properly about a mortgage for 2 weeks! Which was of course music to my ears.

There is another Zuckerberg quote I’ll end with, “We have a saying: “Move fast and break things.”… We have another saying: “The riskiest thing is to take no risks.”

We are of course not all Facebook, but I believe this year is the time for us as an industry to move forward, try new things and embrace change.

Hero

Paul Howard. There are many people in the industry I like and respect, but Paul is without doubt a special person. It is a shame he is leaving Nationwide but he is still in the industry and has a great deal to offer. Over the years he has always been available with some great advice, refreshing honesty and is a true gentleman.

Villain

Bridging companies that allow these expensive loans to be taken out without proper due diligence. It is another accident waiting to happen and must be stamped out.

Whilst we may be heading for our first double-dip recession since 1975, there are enough voices out there who believe it will be shallow and short, (which is how my wife describes me!)

Whilst house sales fell by 1% last year to one of the lowest totals on record, interestingly mortgage lending looks to have hit the £140bn level according to the CML, higher than many predicted. If January is anything to go by then we could eclipse that this year although I appreciate being in the London “bubble” is by no means an accurate guide to the rest of the country.

The main problem for most brokers I have spoken to is trying to predict with any great certainty one month to another. Seasonality and past trends seem to have been consigned to history for the moment.

Against this backdrop, Swaps have risen slightly every day in the past week until yesterday, whilst LIBOR is stubbornly still.

Three-month LIBOR is unchanged at 1.09%.

1-year money is up 0.02% at 1.005%
2-year money is up 0.03% at 1.26%
3-year money is up 0.06% at 1.32%
5-year money is up 0.12% at 1.605%

With the cost of funds seemingly rising, we have therefore seen the usual rate withdrawals from lenders. I still do not understand how some lenders can always manage to give notice of such changes whilst other lenders never seem to try.

There is nothing worse than spending time advising a client on the best product only to see it disappear faster than a pile of cash allegedly speeding offshore into an account named after my dog! The last minute “tip-off” phone call that rates are going in the next millisecond really is a pain.

On to the good news. Although I have given Woolwich a hard time previously, their communication in the last week has been excellent, as are the changes they have announced. It is great to see them back in Buy-To-Let, and giving brokers access to a named, dedicated, mortgage underwriter for every residential case submitted is a real step forward.

It is nice to see a lender apologise for issues and move forward in the right direction, and please do not forget to book the rates before submission.

Norwich & Peterborough’s 10 year fixed rate looks especially good at just 3.99%, (though not available through intermediaries). Although these products are obviously not suitable for all borrowers, I would like to see this market open up a bit more. The challenge is to price a competitive 10 year fixed with some modicum of flexibility built in, much like Coventry’s excellent flexible fixed products.

Accord and Clydesdale are amongst those who have improved their Buy-To-Let offerings, with Clydesdale now the latest lender able to go up to 80%. Note, however, that this is only on a repayment basis.

Meanwhile, Natwest have reduced rates on their 90% LTV products.

Heroes
Lenders who give notice on rate pulls, with special mention to Coventry for consistency and Clydesdale who are giving us almost a week to get applications in. Thankyou.

Villains
The last-minute rate pull lenders, you know who you are. I know it has been covered before but it really is a bug bear and I am sure there is something that can be done to make it more realistic.