57 varieties

Interesting to note that since the Bank of England cut its lending rate two weeks ago from 5.5% to 5.25%, we have seen 57 lenders adjust their Standard Variable Rate (SVR) to reflect the 0.25 reduction. Encouragingly, Stafford Railway Building Society has done one better than the Bank of England by reducing its rate by a huge 0.35 per cent to make it the lowest SVR in the market at 5.99 per cent. However eight of these 57 lenders have cut their SVRs by less than a quarter point, including Northern Rock at 0.1 per cent and Britannia at 0.15 per cent. Most of these rate revisions will come into force in March. Northern Rock's failure to pass on the rate cut in full was no great surprise, with circumstances as they are at the moment meaning that new lending does not appear to feature in the stricken lender's strategy going forward, as now the focus is on their savings book and attracting more money into the coffers through competitively priced deposit accounts. On closer inspection, none of the top five biggest lenders has any current mortgage products linked to SVR.

As mentioned yesterday, there was just one lender left in the 125% product arena, namely Birmingham Midshires (who also call themselves BM Solutions). Lo and behold, today's new is that they too have withdrawn from this marketplace. This now means that it is only possible to borrow upto 100% of the property price, but not beyond it. Amazingly, Birmingham Midshires have announced this product withdrawal retrospectively, as the products were withdrawn last night ! So much for ANY notice period.

If the credit crunch continues, I can foresee lenders reducing their minimum lending to 95% only, which would enforce borrowers to have saved a deposit (which is always good advice anyway, as it saves literally thousands of pounds in associated fees).

This ties in nicely with other news today that First-time buyers (FTBs) are returning to the property market, with the National Association of Estate Agents (NAEA) reporting a fourth consecutive monthly rise in FTB's. New homebuyers increased their market share by 1.5 per cent between December and January, bringing it to 14.5 per cent overall. The increased optimism has been largely put down to the current financial climate with the drop in property prices in some areas acting as a platform for many those who may have otherwise struggled.

It is imperative that FTB's are able to afford property, as this class of borrower is who fuels the mortgage market from it's grass roots.

Interesting times, as always, in the mortgage market.

Old friends revisited, and nothing changes.

Thursday morning:
I had a very enjoyable day out in the countryside of Cornwall yesterday, around St Mellion in North Cornwall and then down to St Ives and Gurnards Head, in west Cornwall, revisiting old friends and seeing how much the place has changed (which it hadn't really, apart from the roadworks along the A38 which will have some impact) and yet the lending world did not stop it's onward march. There were more cutbacks of jobs announced and also the removal of the headline-hitting (for all the wrong reasons) 125% products from 4 lenders (Abbey, Alliance & Leicester, Coventry BS and Godiva Mortgages). This leaves Northern Rock (and one other lender) very much in the frame for this kind of product, designed to help first time buyers get a foothold on the property ladder, albeit at a premium interest rate. I'm sure it's only a question of time before they have to succumb to public pressure, especially they are now government-owned. However, with an interest rate of 8.2%, they effectively make the product unaffordable for First Time Buyers anyway, effectively pricing themselves out of their own market. With the mortgage market being so cyclical, hard times such as those currently being exerienced have been here before. I remember around 28 years ago, when there were actually queues for mortgages, as funding was so tight. Although we've not yet come to that point, the 'stupid' products are being dropped, to leave 'sensible' products left on the shelves. As we all know, 'sensible' people will have saved at least a 5% deposit, and therefore have these 'sensible' products available to them. What is left on the shelves (according to my sourcing system today) are 9,822 mortgages (with some duplicates due to the 'route' the product is available from). Incredible to think a few months ago there were over 20,000 products listed on the sourcing system, which is a clear indication to me that things have got tough. Also, with a deposit comes lower monthly payments, and associated fees, which would save literally thousands of pounds to borrowers. It's also clear that using an Independent Mortgage Adviser makes more sense than ever nowadays as, if there's more than 2 products available for a given situation, advice is what's needed.

I had to re-register with a lender today, as I'd recently changed my mortgage network. When inputting my details, I couldn't get past the screen where I had to input my telephone number (an 0845 number). I called the lender (on an 0845 number) and they said I cannot use an 0845 number for registering. Stupid, or what?

Thursday afternoon:
I just received this email from Northern Rock..(at 14.50pm )
"Withdrawal of Together
Northern Rock will withdraw the Together mortgage range on Thursday 21 February 2008.
Applications for the outgoing Together products will be accepted until 8pm on Thursday 21 February. "

Exactly what I said earlier, and reiterates what I said when I said they'd have to bow to pressure to remove such 'stupid' products. Another example of products being withdrawn at a moment's notice !

Sense will prevail (but not when it comes to lenders and their frustrating online systems, it seems).

The way I work, and a rare day out in the countryside.

Today's news is dominated by the Government's decision to nationalise Northern Rock. They say it is the right thing to do right now as it is a good platform from which to stabilise the bank and repay billions of pounds of state loans.The move follows advice from investment bank Goldman Sachs, which concluded a temporary period of public ownership better met the Government’s objective of protecting taxpayers. In reality, the NR situation affects 3 kinds of people (ignoring all us taxpayers for a moment): savers, borrowers and shareholders. For savers, all deposits are now government-backed, however much you have on deposit. That arguably makes Northern Rock the safest bank to have savings with in the country. If your money is in a different bank, it is covered by the Financial Services Compensation Scheme (FSCS) which guarantees 100% of the first £35,000 of savings. For borrowers, it is "business as usual" in the sense that you should continue to pay your mortgage as you normally do. The only difference now is that, if you missed payments and ended up having your home repossessed, ultimately it would be the government who owned your home. I cannot imagine that Mr Darling would come knocking at your door should you miss a mortgage payment, though! For shareholders, they stand to lose out the most, as shares have been suspended, and therefore cannot be sold, and who's to know what value they will be at should the time come to de-nationalise the bank. As investment advisers tell us, "The value of your investment can do down, as well as plummet" (he said, jokingly) and, sadly, this is a case in point.

Also in today's news is the McCartney/Mills divorce case. It seems that the eventual payout could be a British record for divorce settlements. Not the kind of record Sir Paul would want to make. Let's wish them both happiness in their future lives apart.

On a personal front, I'm taking a day out on Wednesday, as my 'other half' is going on business to Cornwall, and I'm being allowed to tag along. As I don't get out much(!), being home-office based, it's a lovely way of seeing some of the countryside. I'll have my phone on 'divert' so I'll be contactable when people call.

This brings me onto how I actually work. Firstly, a bit of background. After 25 years in the financial services industry, in early 2006, I decided that I would do what is most efficient in every manner for me and my clients. After re-assessing how I work, reading many articles about 'efficiency', I decided to actually put it into practice. ( I hate the word 'practice' as much as I hate the work 'try'. If something needs doing, then do it. Don't 'practice' or 'try' doing it!) I decided to cut out all 'waste of time' elements from my working day, and the biggest waste of time of all is travelling. At a stroke, I gained about 4 hours a day back into my working day. Travelling around a hour there and an hour back, twice a day, was not only a complete waste of time, but not very good for my health or the environment. The absolute heart of my business is dealing with people and solving their situations in the most effective ways, and by effective I mean not only financial but also in my working habit. As in any relationship, it has to work both ways, for them and for me. Also, people nowadays don't necessarily want face-to-face advice, and are happy dealing over the phone and using email. The psychological aspect is that there is no 'sale pressure' and everyone is on the same side, wanting the same results. Also, with busy working lives, people would only see their financial advisers in the evening, after a long working day, so by their very nature, they were not always at their peak of thinking, able to make rational decisions about their financial planning, decisions that could affect them for many years to come. Couple that with dealing with mortgage lenders and insurance companies, and efficient working practises becomes mandatory for me. Nearly every mortgage lender and insurance company nowadays has an online system to 'do business' with. From getting a lender's 'decision in principal' to arranging an insurance policy, it can virtually all be done online nowadays. Instant (ish), efficient, friendly to the environment, lowers costs of running the business, and less stressful. I have a very low carbon footprint! I am also 'paperless' as much as possible. I don't even own a filing cabinet! All post is scanned and put into computer files, and then shredded, and then re-cycled (or into the compost bin).

Being a sole trader, and now being able to deal with people all around the UK, and by cutting out travelling, I have helped people with their mortgage arrangements as far away as Devon, Dorset, Somerset, Glasgow, Worcestershire, Warwickshire, as well as those in my original 'patch' of London, Hertfordshire, Bedfordshire and Buckinghamshire. Now, try getting to some of those places and back in a working day from Berkshire! I do have a stock phrase 'I'm not super-glued to my chair' and so I do go to see people should they demand it. They just have to pay for my time and expenses. See, it's better for everyone to work the way I now do business !

Till next time,

Des