A further tightening of Interest Only policy from Lloyds / Halifax

The following communication was received by email yesterday:

"We would like to update you on a planned change affecting the way in which Halifax Intermediaries processes Interest Only mainstream mortgage applications.

With effect from Tuesday 31 May, all new Interest Only (including part and part) mortgage applications will require evidence of the repayment plan that the customer wishes to use in order to proceed to offer stage. Only if the evidence meets our criteria and covers the full amount requested on an Interest Only basis can a mortgage offer be produced.

Please note that existing customers are also now required to provide a copy of evidence of a suitable repayment plan if they want to convert all or part of their mortgage from Repayment to Interest Only. Once received, this evidence will be checked against our list of acceptable repayment vehicles and the mortgage account will then be transferred to Interest Only.

As a responsible lender, we believe that it is necessary to ensure our borrowers have an appropriate repayment strategy in place to pay off the mortgage balance at the end of their term".

To fix or not? Bank of England's Chief Economist interviewed

Families should plan for interest rates to rise gradually over the next two years, the Bank of England's chief economist signalled in an interview with the Financial Times.

Spencer Dale also made it clear that he personally foresaw a difficult outlook for the economy, saying he favoured an immediate interest rate rise even though the recovery is fragile. Mr Dale is a member of the Bank's monetary policy committee, which sets interest rates. "I'm not particularly happy about voting to raise interest rates and doing it for nasty reasons," he said, referring to his concerns that higher interest rates were needed to rein in inflation rather than growth, which remains weak. "I don't take lightly the impact this could have on some families," he added. "But I think the cost to our economy as a whole - were inflation to persist for longer and our credibility start to be eroded - would be even worse. "

His comments marked the first time that the Bank has provided guidance to households on interest rates, helping them decide whether to sign fixed interest rate mortgages or gamble on the Bank's monthly rate-setting meetings.

Source : Financial Times page 1 - 21.5.11.

Expected increases in interest rates to be delayed?

The Council of Mortgage Lenders (CML) has said that any base rate rise could be pushed back to late summer or into 2012.

The measure was frozen last week against a backdrop of weaker than expected economic data, suggesting a weak economic recovery. The body said that although inflationary pressures persist, it thinks that the Bank of England's Monetary Policy Committee will be swayed by the poor state of household finances and its impact on consumer spending.

"August now looks the earliest possible date for a rate rise, but weaker short-term prospects for economic growth suggest that the committee may hold off from any tightening for the rest of this year," predicted the CML.

Lenders start to compete with lower rates

Recent weeks and this week in particular has seen a rush of activity as lenders compete with one other offering lower fixed and tracker rates. Some are reducing fees and offering other incentives. This is very good news for the consumer (and our customers), as increased proper competition means that lenders are starting to reduce the vastly increased margins and fees they have charged since 2008.

One lender tells us that: "As you can see we have reduced the rates on our fixed and tracker rates across the board, with our new credit system now in place we are looking to massively increase business levels in May. Also we now offer an amazingly competitive 90% 2 year fixed deal (purchase products launched - with 2 Year Fixed rates starting from 5.65% with no additional product fee)".

This is a good time to be considering a purchase or reviewing your existing arrangements. So unless you are currently paying 2.5% or lower on your variable rate, it is highly likely that you could save money now! Indeed, you can be sure that if we suggest you move your mortgage, we will be certain it is the best thing for you! So why not give us a call on 020 8652 9944, 7 days a week?