TSLE2019: ‘We don’t want regulator looking at gaming of five-year fixes’ – Moloney

  • 14/02/2019
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TSLE2019: ‘We don’t want regulator looking at gaming of five-year fixes’ – Moloney
One Savings Bank has warned lenders they may start attracting regulatory attention with how they structure five-year fixed rate buy-to-let mortgage products.


Five-year deals do not come under the same stress testing scrutiny that shorter-term products do and so have seen a significant uptick in sales over the last year.

The Prudential Regulation Authority (PRA) has already shown interest in the market last year.

Chairing the lender panel at The Specialist Lending Event 2019, 3MC joint managing director Doug Hall noted that his firm had seen lenders introducing five-year fixes with just three-year early repayment charges (ERCs).

“It gives the broker the ability to leverage but it also gives you the ability to start to move out of that in three years’ time,” he said.

HTB managing director of specialist mortgages Charles McDowell said the lender had started doing so with only a two-year ERC, although this was more expensive because of the way it was funded.

“The landlord has to pay for that, but it gives the landlord better flexibility going forward and the leverage of being able to get better affordability on a five year [deal],” he said.


Optically wrong

However, One Savings Bank sales director Adrian Moloney was concerned about how lenders were developing five-year products further.

“The most interesting thing is we don’t want the regulator looking at five-year fixes and the gaming of that,” he said.

“Something I was really interested to see was that someone brought a five-year fix out with a five per cent arrangement fee.

“If there’s anything that’s optically wrong in that space it’s a product like that.”

Vida Homeloans director of sales Louisa Sedgwick agreed that there were concerns people could be gaming the system on products such as that.

But she noted that having shorter ERCs on five-year deals could be a “brilliant option” although it would be more expensive.

“It’s not something we would probably consider because funding that as a securitised lender is quite tricky,” she said.

“But there’s some really good priced two-year fixes out there as well right now,” she added.


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