Lenders’ margins on mortgage products have hit an all-time high over the last week, as the difference between the rates paid by borrowers and the cost of swap rates has widened substantially. The average swap rate on two-year fixed rate money currently stands at 126 basis points (bps), or 1.26%, while the average interest rate charged on a two-year fixed rate mortgage is 4.55%, resulting in an unprecedented lender margin of 3.29% on these products.
Two years ago the margin on a two-year fixed deal stood at 1.28%. The margin leaps even higher to 3.35% on an average five-year fixed rate product and 3.57% on a three-year fix. Michelle Slade, spokesperson for Moneyfacts.co.uk, said: “Mortgage rates are falling, but only a fraction of the reduced funding cost is being passed on as lenders continue to repair their balance sheets. Borrowers will be angered that they continue to pay the price for mistakes made by lenders, particularly those who have accepted government funding.”
Moneyfacts calculates that, going forward, were Bank Base Rate to rise as quickly as it has fallen, and were lenders to maintain their current margins, the average rates charged to borrowers on mortgages could reach around 8%. Slade said in the current market mortgage availability and the maximum loan sizes continue to improve, but there is still a long way to go before any reasonable normality is returned. “Swap rates are the traditional barometer of fixed rate mortgages, but with lenders still nervous of entering the money markets, many are opting for on balance sheet funding through their savings book.”
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The new coalition government have announced today that Home Information Packs (HIPs) will be scrapped from the 21st May 2010. This is great news for people wishing to sell their house asit will save them the expense (typically £350) and also the time lag that HIPs introduced to the residential property market.
HIPs were introduced to speed up the sales process and ironically the exact same reason is being given for their demise. Shame more consultation was not made by the former government as over a billions pounds and innumerable trees have been sacrificed to this bureaucratic pipedream.
Energy Performance Certificates (EPCs) will still be required as these are part of an EU directive, however, early signs are that the EPC will not now be required prior to first day marketing.
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Rightmove announced today that the housing market has gathered pace in April, with sellers asking 6% more for their homes than a year ago, up from 5.3% in March. The rise in prices comes despite a pick up in supply, with more sellers putting their homes up for sale than at any time since August 2008.
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The Conservatives have announced their election manifesto and one of their key property points is a proposal to scrap Home Information Packs (HIPs). Whilst the initial intention behind the HIPs was well-intentioned (ie: to speed up the sales process and to have less abortive purchases) in reality they have proved little more than a sales tax and a worthless bureaucratic burden. Far from speeding up the process they have introduced delay and a duplication of cost because most purchasers go on to replicate the searches which are a component part of the HIP! A crazy situation whereby we now have a £100m pa ‘industry’ producing no value. If it comes to pass we should all therefore rejoice at their demise.
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