Base Rate Rise? Ask SONIA

You to Me Are Everything

SONIA predicts base rate rise

Unsurprisingly, the Bank of England (BoE) has voted to keep interest rates on hold again and it seems everyone is talking about how long they will remain at such low levels for. Taking a quick glance through the finance pages, even the economists can’t agree.

The first increase is expected to occur anywhere between 2013 and 2015 – quite a range of ‘predictions’ (with a spread like that, it’s hard to think of them as ‘forecasts’).  So we thought we’d ask SONIA.  No, not the Liverpudlian pint-sized pop princess, the Sterling Overnight Index Average. Read more of this post

SVR Set to Soar?

(Source: Bloomberg)

It was only a matter of time before the direct effects of the Eurozone crisis were felt on the ground in the UK. Over the past 3 months the rate at which banks lend to each other has increased significantly. The 3 month Sterling LIBOR (London Interbank Offered Rate) has risen to a two year high of more than 1%, making their cost of borrowing much more expensive.

Back in August, LIBOR stood at 0.83%; closer to the long term ‘typical’ rate of 10 to 20 basis points above the Bank of England Base Rate. But the steady rise since then shows that confidence between the banks is wavering and in the past couple of weeks, we’ve seen banks start to pass on their increased cost to mortgage customers.

Since the beginning of November, we’ve seen new mortgage products being launched with higher rates – not just tracker products (whose rates typically follow LIBOR) but also new fixed rate mortgage products too – and from the big banking groups, not just smaller lenders operating on tighter margins. Santander, Halifax and Woolwich (part of Barclays) have all launched new products with higher pay rates.

Worryingly for borrowers, there is also increasing pressure on Standard Variable Rates (SVR). In November, the Bank of Scotland and TMB (part of the Lloyds Banking Group) have both raised SVR from 4.84% to 4.95% and SVR is typically far higher than the headline grabbing Base Rate – for example the Mortgage Trust (Paragon) SVR is 5.1% and even the high street lenders’ variable rates are currently surprisingly high: Northern Rock’s SVR is, 4.79% and Natwest is 4%. Others are set to follow suit with rate rises unless confidence quickly returns and LIBOR begins to fall.

It’s worth remembering that a bank can change its SVR at any time as it’s not linked to the Bank of England Base Rate, which is expected to remain static for the next 12 to 18 months. Around 40% of properties are currently on SVR mortgages, so a widespread hike in SVR would have a dramatic impact on the economy by reducing consumers’ spending power.

How to Secure a Mortgage

I wrote last week about my first job as an underwriter, where I used pen, paper and an understanding of the client to underwrite mortgages. While today we use computers and complicated algorithms to secure a mortgage, this understanding of traditional processes has helped me comprehend why certain documents and information are requested by lenders.

With this in mind I will look this week at a few things you can do to manage the outcome as much as possible. Here are a few underwriter pointers about what lenders are looking for that I hope will help you get one step closer to securing a mortgage. Read more of this post

How to Think Like an Underwriter

In recent years UK mortgage lending has returned to the standards that I was taught in my first mortgage based post as an underwriter, after leaving University.

I worked for a traditional building society with one branch in Surrey. I was taught how to underwrite mortgages using pen, paper and an understanding of the client – as opposed to inputting information into a computer and awaiting for a yes or no answer generated by an unfathomable algorithm.

This understanding of traditional processes helped me to secure a deeper knowledge of why lenders act in a certain way and request certain documentation and information. It also helps me to explain to a somewhat frustrated client, who has been asked to provide yet another bank statement or payslip, why the additional information has been requested. Read more of this post

Investing in Residential Property

Investing in the Private Rented Sector (PRS) remains popular with private investors from all walks of life because it is the one asset class that enables the ‘man on the street’ to leverage their investment using bank financing.  You only have to look at the numbers of investors seeking to acquire additional PRS assets.

And despite what some may think, lenders are still willing to lend, principally because residential property is seen as a safe asset class.  Total returns from residential property have a history of strong performance and have out-performed other commonly held asset classes.  It should also be remembered that in the event that an investor defaults, the lender has first charge over the asset, so lending on residential property is generally considered to by relatively low-risk.

Lending landscape

Of course, lending has reduced over the past 3 years as the banks have been forced to strengthen their balance sheets.  They’re in the position to be able to pick and choose who they lend to and, perhaps understandably, have become more cautious and stricter with their lending criteria.  In this new lending landscape, lenders are cherry picking only to the ‘best’ applicants.  So step one, before seriously considering making an investment in property, is to check your credit score and make reparations if there are any issues. Read more of this post

RESI 2011 – The Debrief

RESI 2011 logoSo RESI is a few weeks behind us – was it worth the effort?

There is no doubt in my mind that it is a great way of meeting up with old acquaintances as well as making new contacts. Property Week have done a great job attracting over 1,000 people from the residential sector to a two day event in Wales. The calibre of those attending is impressive as well.

With an event of this size it is difficult for the subject matter to be very specific, it has to appeal to a wide range of interests. However, the big names from the industry were there for you to listen to on the main stage, or talk to at other times during the event.

The value for me is to see what people are talking about in the residential sector, what is the mood like, are others investing or sitting tight?

Three years ago on my drive to the event I was listening to the radio when Robert Peston was breaking the HBOS/Lloyds story, not a great backdrop for RESI 2008. This year the economy was once again the talking point, in particular the Euro crisis. However, this year at RESI there seemed more of a feel that we know there is a lot of uncertainty in the economy but we are planning for it, whereas in 2008 it was more can we get through this, what is coming next?

I wonder what the environment will be for 2012? One thing seems certain, there will still be a low base rate to be working from – 0.5% I expect.

What did you enjoy about RESI 2011?

At Last, Some Sunshine this Year!

With the number of lenders and investment mortgage products increasing in 2011, and with continuing strong levels of tenant demand, the outlook for investor landlords is increasingly positive.

This is reflected in figures released by the Council of Mortgage Lenders (CML), that show Buy-to-Let lenders approved 32,000 mortgages, worth £3.5 billion between April and July – the sector’s busiest quarter since the start of the financial crisis in 2008 and an increase of 21% on the same quarter last year.

Read more of this post

What Mortgage Should I Get?

With the economy slowly climbing out of recession, millions of homeowners with mortgages are facing a dilemma.

With pay rates on mortgage products at an all time low, is it time to take advantage and either fix your mortgage for the long-term or opt for the cheaper tracker rate linked to Bank of England base rate


Many are currently holding out on the Standard Variable Rate (SVR) with their current lender, but with borrowers able to switch mortgage, often for a minimal cost, the more shrewd borrowers can shop around now.

Read more of this post

Winning Awards – Rewarding the Behaviour You Want

South London Business Awards Overall Business of the Year

Young London win 'Overall Business of the Year' at the South London Business Awards

I do not often reflect on our successes for long. However, we have had such a great run recently, and I want to make a point on the back of it.

In June, Young London won six awards, three at The Times & Sunday Times Lettings Awards and three South London Business Awards supported by HSBC. The theme in the judges comments was around our focus on customer service, specifically that we reward our team on customer service feedback, not on a standard commission structure.

We made this change in our remuneration process last year, and it seemed obvious to us that we should have done it sooner.

We focus on customer service and our mantra is giving ‘amazing service’, so it seemed logical to reward based on this. We questioned how you can say at staff meetings that customer service is central to Young London when you are then paying commission only based on revenue?

Read more of this post

A Brief Muse on the Base Rate


Bank of EnglandThe press love speculating on the base rate.

It is amazing how many times over the last few years the papers have spoken about the imminent increase of the base rate, hinting that you should rush out and sign up to a fixed rate.

In one of the Sundays recently I read with amusement  an

article about how much people would have over paid if they had signed up to a fixed rate over the last few years!

Read more of this post

10 Ways to a Clean and Well Maintained Credit Reference

10 ways to a good credit balanceIn the current market, it is vital to ensure that your credit rating is as healthy as possible. Lenders are extremely cautious and prefer to lend only to those with the most squeaky clean credit history.

That’s why if you are considering applying f or finance such as a m

ortgage or secured loan, it pays to make sure that your credit report is in the best possible shape.

Read more of this post

Poll: Will the Base Rate Rise on June 9th?

VOTEThe outcome of the next Monetary Policy Committee (MPC) meeting will be announced on June 9th. With inflation higher than expected, the speculation is that the base rate will increase – although this has been rumoured several times in  the past 26 months.

According to the ONS’s preliminary estimate, GDP had risen by 0.5% during the first quarter of 2011. It was noted in the last meeting that there was also ‘a good chance that inflation would reach 5% later in 2011′.

At the last meeting in April, 3 members of the committee voted against the proposal, with Spencer Dale and Martin Weale  suggesting an increase to base rate by 25 basis points. Andrew Sentance preferred to increase base rate by 50 basis points, and had his term not come to an end last month he would have been likely to push again for an increase.

We ask you: will the base rate rise on June 9th?

[polldaddy poll=5099908]

Financial Trouble for Home Owners?

Mervyn King

Mervyn King - Governor of the Bank of England and Chairman of the Monetary Policy Committee

The Bank of England’s latest inflation figures reveal that the Consumer Prices Index (CPI) has reached 4.5%, and last week we heard that inflation is likely to be 5% by the end of the year, higher than the previously predicted 4.5%.  This then gave way to speculation that there would be an imminent base rate move.  Although the next announcement from Mervyn King, Governor of the Bank of England and Chairman of the Monetary Policy Committee (CMP) will not take place until 9 June, it has created an inevitable unease for mortgage borrowers.  Currently many homeowners are feeling relatively unaffected by the economic squeeze simply because they are on extremely good tracker rates or low SVR which makes for low mortgage payments, insulating them to a degree from the increasing costs of food, transport and utilities.

In this regard trouble could certainly be on its way for home owners.

A study conducted by the Institute for Fiscal Studies has shown that households are facing a large drop in disposable income – the largest drop in 30 years.

With wages often the same as back in 2005, any significant move in the base rate is likely to cause issues and we may see home owners struggling

to meet their new, higher repayments.

Read more of this post

Shortage of Equity and Debt

Barclays / Investec

Barclays and Investec are still lending

Meeting after meeting, telephone call after telephone call, the topic often reverts to the same thing – where is the next tranche of equity/debt coming from


We hear that some lenders are lending, with names often mentioned including Barclays and Investec,  but the scale has changed dramatically.

Long term regeneration schemes are a distant memory, and small developments/investments are where the thinking has to start. Slowly, slowly seems to be a key theme of the day.

Read more of this post

Tesco Bank, Mortgage Market Saviour?

TescoSupermarket giant Tesco, through its Tesco Bank, is due to enter the market this Summer; currently just awaiting FSA regulatory approval of their mortgage proposition.

Despite what many people’s knee-jerk reaction may be to picking up a mortgage along with the weekly veg, I think that this is a positive step for the mortgage market and housing market.

Read more of this post

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