HSBC reintroduces sub-one per cent mortgage; YBS holds standard variable rate – round-up
The sub-one per cent deals are two-year tracker products at 60 per cent loan to value (LTV) which have seen a rate reduction of 0.15 per cent. They are now priced at 0.99 per cent, which is 0.74 per cent plus the current base rate of 0.25 per cent.
These are available to standard residential existing first-time and homeowner borrowers who are remortgaging, switching and taking out further advances.
The products have a £999 fee.
Also at 60 per cent LTV, its five-year fixed remortgage with a £999 fee has been reduced by 0.10 per cent to 1.44 per cent and its five-year fixed fee-free remortgage has been reduced by the same amount to 1.59 per cent.
At 85 per cent LTV, its five-year fixed purchase and first-time buyer product with a £999 fee has been reduced by 0.10 per cent to 1.79 per cent, and the 90 per cent LTV equivalent has received a similar cut to 2.19 per cent.
Reductions of up to 0.10 per cent have also been made to its buy-to-let range.
Michelle Andrews, HSBC UK’s head of buying a home, said: “We are following rate reductions just before Christmas with a further rate refresh, where we are reducing our fixed rate mortgages by up to 0.1 per cent, whilst our more flexible tracker deals are also being reduced across the range.
“By providing a sub-one per cent option for customers with a higher amount of equity and reducing higher LTV rates for house purchases, we are offering those wishing to refinance their existing home, or seeking their first or next move on the property ladder, access to highly competitive rates with the option to choose between more flexible deals or secure longer term payment security.”
Yorkshire Building Society maintains SVR
Yorkshire Building Society has decided to hold its standard variable rate (SVR) despite other lenders increasing the rate in light of the base rate change.
Its SVR is currently 4.49 per cent.
The mutual will also add 0.10 per cent to its variable rate savings accounts.
Chris Irwin, director of savings at Yorkshire Building Society, said: “It has been a tough few years for savers so we’re delighted to be able increase our savings products at the same time as protecting our borrowers from the increase.
“With no external shareholders to satisfy we have protected savers as far as possible during the extended period of a record low bank rate, maintaining an average interest rate on our accounts which has been consistently higher than the market average.”
Irwin added: “It is also pleasing that our robust financial position allows us to protect repayments for some of our borrowers by not increasing our SVR.”
All changes will come into force on 1 February.
RIO mortgage sales double but progress is ‘poor’ – Responsible Life
Responsible Life analysed figures obtained from the Financial Conduct Authority (FCA) which found RIO mortgages only accounted for 0.22 per cent of the market in Q3 however, a marginal improvement on the 0.11 per cent it made up in 2020.
This means RIOs accounted for one in every 450 products sold at the time.
The lender said the progress of the product was “poor” and affordability remained a barrier for many.
It said RIOs were originally intended for interest-only mortgage holders to transition onto once they retired. However, the need for borrowers to prove they can afford RIO repayments if their partner dies is where many fall short.
This leaves those who are too young for a lifetime mortgage trapped on a lender’s standard variable rate and unable to refinance, Responsible Life warned.
Changing the RIO
Responsible Life called for changes to be made to the RIO such as allowing lifetime mortgages to be considered as a payment plan once borrowers get older, or when a partner dies. It also proposed for the sale of the property to be a valid long-term repayment plan should either partner die.
The lender said in its current form, the RIO will never become mainstream despite there being a demand for them.
As of the latest UK Finance data, there were 908,000 outstanding interest-only mortgages at the end of 2020, which could be suitable for a RIO.
When RIOs were launched in March 2018, the FCA predicted that around 21,000 would have been sold by 2021. However, only 3,213 had been sold by the end of 2020, rising to 5,029 by the end of September 2021, according to the FCA.
Steve Wilkie (pictured), executive chairman of Responsible Life, said: “Sales of RIOs have doubled annually but this was from a very low base. It still has to be said that progress has been poor and RIOs still aren’t making a dent in the problem.
“Hundreds of thousands of people face hitting retirement with conventional interest-only mortgages they cannot repay and RIOs could be a tremendously useful product. But they must be capable of reaching a wider audience, and that all comes down to how easily applicants pass affordability tests.
“This is something this product was specifically designed to assist with, so perhaps it’s time policymakers looked again at the way they’re structured to avoid creating new mortgage prisoners.”
Wilkie said the situation could worsen this year, exacerbated by the rising cost of living.
He added: “The sole survivor rule is one key area that could be overhauled, because it means that each individual borrower must show they can afford the monthly payments on their own.
“An easy way around this rule would be to allow borrowers to plan for the sale of their home as a repayment vehicle, or convert their RIO into a lifetime mortgage when it makes financial sense.”
Natwest raises SVR in line with base rate increase
A number of lenders announced there would be rate changes after the base rate rose from its record low of 0.1 per cent to 0.25 per cent last month.
Changes will apply to new borrowers from 17 January. Residential mortgage deals will have an SVR of 3.74 per cent, while buy-to-let borrowers will have a rate of 4.24 per cent.
These represent increases of 0.15 per cent, in line with the base rate change.
Existing Natwest mortgage customers on an SVR will see their rate increase from 1 February, similar to other lenders such as Santander and Nationwide whose rates will rise in the next month.
Customers on a fixed rate deal or those pending completion will move onto the new SVR at the end of their product term.
Remortgage awareness low despite potential £2,000 savings
Habito’s head of mortgage advice Will Rhind said a homeowner on a typical SVR of 3.5 per cent could reduce payments from £1,002 per month to £834 if they select a 1.86 per cent rate from HSBC.
This is equivalent to a £168 saving per month or £2,016 per year, and the certainty that payments will not change until 2027.
Rhind added that potential savings could be even greater as SVRs could reach as high as six per cent.
He said electing for a 10-year fixed rate product, for instance Yorkshire Building Society’s 3.39 per cent deal, could save borrowers an average of £156 over a year and the security of knowing that payments will not change until 2032.
However, a survey from Habito, which collated responses from around 2,000 people, found that 11 per cent of UK homeowners said they would not know where to begin when it came to remortgaging.
Around 47 per cent said they would reconsider remortgaging to a cheaper interest deal over the next six months to save money.
Nearly 20 per cent said they would consider fixing for 10-year fixed rate or longer to avoid remortgaging in the near future.
The online broker urged the nearly two million UK homeowners on variable rates or SVRs to remortgage to mitigate some costs of inflation.
Martijn van der Heijden, chief financial officer at Habito, said: “By Spring, the forecasters are warning us that household finances will be heavily squeezed by rising energy prices and food prices.
“On top of this, we’ve had the Bank of England say that December’s base rate hike could be one of many going into 2022. Remortgaging doesn’t have to be complicated, but it can take several weeks – so speak to a broker well before your current deal expires.”
He added that many homeowners had not experienced a rising base rate environment, with homeowners who had bought a home in the last 12 years only having to remortgage when rates have been below one per cent.
Van der Heijden said there was growing expectation of a second base rate rise as soon as February, and said the firm had seen a more customers opting for five-year fixed rates or longer rather than two-year fixes.
Popularity for five-year fixed rate deals mortgages had reached an all-time high among the broker’s client bank, with 52 per cent of customers looking for such deals, whilst demand for two-year fixed rate deals has fallen to an all-time low of 37 per cent.
Remortgage customers has also reached a 20-month high of 63 per cent, compared to 38 per cent of customers seeking mortgages for purchase.
Van der Heijden said whilst the rising base rate was a risk, there had been more innovation in the market for long-term fixed rates which would protect consumers. He pointed to the Habito One product which fixes for between 10 to 40 years and was launched in March.
Platform makes comprehensive rate changes across range
On the new business side, mainstream products between 60 per cent and 95 per cent loan to value (LTV) have had their rates cut by between 0.2 and 0.3 per cent.
Two-year fixed rates start from 1.25 per cent, three-year and five-year fixed rates begin from 1.41 per cent.
Cashback for fee-free three and five-year fixed rate products at 80 to 90 per cent LTV reduced to £500, whilst cashback for three and five-year fixed rate at 95 per cent LTV has increased to £1,000
In its professional mortgage range, it has cut two and five-year fixed rates by up to 0.11 per cent and 0.3 per cent respectively.
Its new business professional mortgage two-year fixed rate now starts from 1.61 per cent, and its five-year fixed rate begins from 2.07 per cent.
Two and five-year buy-to-let fixed rates have been cut by up to 0.1 per cent, and premier products in range have fallen by 0.06 per cent.
For instance, two-year fixed rates start from 1.3 per cent, and its five-year fixed rates start from 1.56 per cent. On the premier side, rates start from 1.17 per cent.
Help to Buy products in its new business range, both two and five-year fixed rates, have been cut by 0.06 per cent. Its two-year fixed rate starts from 1.75 per cent and its five-year fixed rate starts from 1.91 per cent.
In Platform’s product switch range, mainstream products have had their rates reduced between 0.1 per cent and 0.36 per cent, with the higher rate cuts applying to products at 80 to 90 per cent LTV.
Buy-to-let and Help to Buy products in its product switch range have also had their rates cut.
The lender has also increased its standard variable rate (SVR) from 4.34 per cent to 4.49 per cent for new business from today, following the Bank of England’s decision last week to increase the interest rate to 0.25 per cent.
Borrowers on unfavourable rates should be first in remortgage queue – Hunt
In case you’ve not seen the latest data, it reported that the annual inflation rate had risen from 3.1 per cent in September to 4.2 per cent last month – that just so happens to be the highest annual rate since November 2011 when it hit 4.8 per cent.
The anticipation must be that in the months ahead, that rate is likely to be surpassed.
The pressure to act on inflation, and the approach the Bank might take in order to curb it, has been building for some months now and it was interesting to hear the Chancellor during the Budget suggesting he had written to the Bank to remind them of their responsibilities in terms of the two per cent inflation target.
An independent market
Far be it for me to suggest the politicians are seeking to ‘influence’ an ‘independent’ body, but there seemed to be little doubt that the Chancellor was expecting the Monetary Policy Committee (MPC) to act sooner rather than later.
The fact the MPC didn’t act in November is perhaps a signal of its true independence. However one wonders what the impact of these latest inflation figures will be, whether it will feel compelled to do so in December, and what the repercussions might be for our market in particular.
Perhaps understandably, given their rarity, bank base rate rises are often seized upon by both media and stakeholders alike. If ‘rates are going up’ then the obvious message is to ‘act now’ before they go up again and really add to the cost of your mortgage.
However, the vast majority of borrowers are on fixed rate products anyway so the impact of a rise will not be felt in that sense.
Perhaps, of more interest and a more impactful message, exists around those who are essentially sitting on highly uncompetitive products.
Targeting borrowers on high rates
Anyone who remortgaged over 18 months ago, or indeed the thousands upon thousands of borrowers who have never remortgaged at all, are clearly going to find a much more competitive mortgage environment to enter right now – even with product rates having inched up from their previous lows of a couple of months ago.
In this day and age, it still staggers me that we don’t see more remortgage business. Levels of borrower inertia are still bewildering in my view, and any borrower who is currently sat on an standard variable rate (SVR) or an uncompetitive rate seems somehow to be an affront to the advisory profession.
We know why lenders are happy and willing to have large numbers sat on their back book paying over the odds, but anyone else involved in the market must be scratching their head in bemusement that this is still tolerated.
So, while a forthcoming bank base rate rise may not ultimately make too much difference, it does present a rare opportunity to shout the remortgage message from the rooftops.
Let’s not miss this chance and let’s help as many borrowers who are overpaying to at least recognise there is a whole world of other products and solutions available to them.
Attractive mortgage rates make it impossible to advise a lender switch – Marketwatch
For some, avoiding intensive affordability checks while securing a favourable rate with a product transfer may seem like the better option.
So this week, Mortgage Solutions is asking: Do you suspect you’ll conduct a higher number of product transfers this year?
Lilla Dilliway, director at BlueWing Financials
Whilst carefully checking the clients’ circumstances in all cases, we have indeed carried out more product transfers than last year due to the impact of Covid on a client’s income situation.
This is especially true for self-employed people who have received Self Employed Income Support Scheme (SEISS) grants, which some lenders don’t accept or assess on a case-by-case basis making it rather difficult to switch lenders at the moment.
Employed clients are mostly unaffected, as long as they are not on furlough anymore.
Meanwhile, contractors are impacted by the IR35 changes which came in this April and saw some umbrella companies dodging tax by changing their employee structure. This has made it difficult for some contractors to find a new contract, particularly during the turmoil of the pandemic.
All in all, yes, we can see an increase in product transfer applications compared to previous years.
James McGregor, director Mesa Financial
This is certainly an interesting situation and as advisers, our role has definitely changed due to the pandemic.
Lenders have changed their processes significantly which is causing delays. On top of this, they are becoming a bit more savvy with their pricing for existing customers.
They have worked out it is cheaper for them to keep their existing customers rather than spend money obtaining new ones, which means they can shave a few points off their mortgage margins. If you are then purely advising on interest rates it becomes impossible to advise your client to change to a new lender which will lead to the advice of a rate switch.
Lenders are keen to fix people for longer too as it guarantees their own debt books, but the general public must be aware of any large early repayment charges that come with these attractive rates.
Lenders need to make their profit somewhere and fixing customers to long-term rates, then charging huge exit fees when individual circumstances change, seems to be a go-to strategy right now.
I believe they are hedging that a large portion of people will have to pay early repayment charges over the next five years. People need to remember, banks aim to make the maximum profit which they are not currently finding in their lending margins.
People’s lives are constantly changing and evolving. This means that the pricing of a mortgage falls pretty low on priorities for many.
It’s crucial for our advisers to stay close to our clients and make sure we are advising correctly, mitigating the risk of problems.
John Phillips, national operations director at Just Mortgages and Spicerhaart
With the vast amount of change this year, there will probably be a lot more product transfers in 2021 as it could well be harder for a lot of individuals to remortgage away to a different lender.
In the past few months, there has been a lot of change in the job market; clients are now moving jobs, coming off furlough, some are going self-employed. All of these changes may make it harder for people to remortgage to a new lender and should result in more product transfers.
The positive is that product ranges are now back to virtually pre-pandemic levels, so the choice is there. To get that choice right, regardless of whether a client is having a remortgage or a product transfer, it is essential to conduct a thorough review.
One of the key differences in how Just Mortgages approaches product transfers is that our brokers take a holistic view of the client, much like we would with a new client. We will conduct a full fact-find, from top to bottom to understand what has changed.
Whether that is salary, or the client’s family circumstances have changed, our brokers do a comprehensive review with the client to ensure they are switched onto the right product and they have the right protection in place.
Once that review has been completed, it will become clear if a product transfer is the right move for the client, and our brokers can ensure they get the best advice possible.
With competition between lenders fierce, rates are currently extremely low, and most clients whose salary have held up will be better off switching products, rather than moving onto the lender’s standard variable rate.
Borrowers could save £10,000 switching from SVR to five-year fixed – Moneyfacts
Meanwhile borrowers on a two-year fixed could also save around £4,704 in the first two years of their term compared to if they had a SVR mortgage.
The calculations were based on an outstanding mortgage balance of £200,000 over a 25-year term with an average five-year fixed rate of 2.81 per cent and an average two-year fixed of 2.58 per cent. This compares to an average SVR of 4.41 per cent.
The research found that that whilst average two, five and 10-year fixed rates had gone up slightly in the past six months there are signs of improvement as rate competition and product volumes are starting to return.
Moneyfacts finance expert Rachel Springall said that whilst switching to a fixed-rate mortgage could save borrowers thousands of pounds the ability to move would be dependent on individual circumstance, such as furlough and level of disposable income.
She also warned that even though some two-year fixed rates were priced as low as 0.99 per cent that it may not be the best deal in terms of “true cost”, therefore borrowers should be wary of “headline grabbing rates”.
According to Moneyfacts, TSB is offering a 0.99 per cent two-year fixed mortgage for remortgage customers at 60 per cent loan-to-value. This inlcudes a £1,495 fee and an includes an incentive package.
Springall added: “Mortgage borrowing remains robust with the Bank of England highlighting the strongest figures seen since records began and this momentum may continue as normality returns and lenders launch new deals to entice new customers.
“As more choice returns to the market and attractive deals grab the spotlight, navigating the mortgage maze could be easier if consumers seek out independent financial advice and take away the potential stresses of applying direct and managing the process to completion.”
Top 10 most read mortgage broker stories this week – 30/04/2021
The parliamentary debate over an amendment to the Financial Services Bill to introduce a standard variable rate cap for mortgage prisoners also sparked readers’ interest.
NatWest removes hard footprint for AIPs filed through brokers
More 2 Life introduces ‘highest LTV’ lifetime mortgage
Government-backed loan could help if SVR cap is voted down – Mortgage Prisoners UK
Mortgage prisoners group hits out after House of Commons defeat
Four in five first-time buyers rejected for mortgage – Aldermore
NatWest’s Felstead to exit this summer as Christodoulides steps up – exclusive
NatWest cuts product rates and TSB pulls high-fee mortgages
A fifth of homeowners refuse to take out protection – Metlife UK
Nationwide launches green cashback mortgage
Contractor and furlough mortgages hot topics as Primis desk sees record call numbers
MPs vote down mortgage prisoner SVR cap in Commons
The amendment was passed in the House of Lords nearly two weeks ago and would have allowed the government to set a maximum SVR for borrowers who were tied to inactive or unregulated lenders.
The cap would have been two per cent above the Bank of England’s base rate.
However, despite various MPs saying they were in favour of the amendment in Parliament, the majority voted to disagree with the measure.
The number of Conservative MPs following the whip voting to scrap the amendment totaled 355, while 195 Labour MPs voted in favour in conjunction with 72 MPs from other parties.
‘Sticking a plaster’ on the problem
Anthony Browne, Conservative MP for South Cambridgeshire said during the debate: “We agree that we need to help these people, but the question is: how do we do that? The cap of interest rates is, as people say, a sticking plaster—even its supporters say that. I can see the appeal of it, but this sticking plaster comes at great cost: Parliament would be setting out interest rates in primary legislation.
“That could lead to huge unintended consequences in lots of ways—for example, through the impact on financial stability that we heard about earlier on some of the firms. It would also set an extraordinary precedent, with the government doing price controls in that way.”
He added: “It is also really not the solution we need. Where someone is trapped in a horrible prison with their guards abusing them and they are very uncomfortable, would they want that prison to be made more comfortable and the guards to behave themselves, as this cap in effect proposes, or would they want to get out of the prison?
“They would want to get out of the prison. We need to make sure that mortgage prisoners can move to other mortgage providers.”