Lenders struggle to keep up with the fall-out from their broken piggy-banks
Posted on 27 March 2008 by
FURTHER BANK RATE CUT STILL NEEDED DESPITE INFLATION AND GROWTH FIGURES
· Treasury predicts 2.25% growth for 2009 and inflation reaches the magic 3%
A further Bank Rate cut would not normally be expected in an environment of improved growth expectations combined with inflation climbing to 1% over target. However, cash-strapped homeowners will be relieved to know that some relief to their purse-strings may still be due, as mortgage lenders’ own cost of borrowing is high, and a further Bank Rate cut may be used to relieve this. The hope for buyers and homeowners, will be that the Monetary Policy Committee is not deterred from implementing another rate cut soon, by having to write a letter of explanation to the Chancellor to explain why inflation has exceeded 3%.”
Deutsche Bank’s report this week showed that lender margins are in some places three times higher than last year. This is by no means profiteering: this time last year, lenders’ focus was on gobbling up market share, normally at loss-leading mortgage rates; however, lenders’ own cost of borrowing now, for fixed rates and variable rates alike, is so high that they would need to charge in the region of three quarters of a percent above Bank Rate, or an equivalently large fee, just to break even.”
What products are available now?
It will come as no surprise that interest rates have climbed again this week across the board, as lenders struggle to keep up with the fall-out from their broken piggy-banks. First Direct’s two year fix remains a best buy despite its increase to 4.95%. However Cheltenham and Gloucester’s processing times are keener, they offer a good alternative at the lower rate of 4.78% for 18 months, or 4.88% for two years for mortgages of 75% loan-to-value or lower. This works out cheaper than First Direct for borrowers with a mortgage between £50,000 and £56,000**. Woolwich continues to take the top spot for ten year fixes with its highly competitive 5.29% fixed rate with free valuation and legals on remortgages.
Categories: Mortgage Lenders
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