Unless you are a real mortgage Geek, or an avid reader of the money section in the Times, it may have passed your radar that Lloyds (via Halifax) bought a huge mortgage book from Tesco (Yes, they do mortgages too). I made a little press on it below for which they used my quote in the headline (quite accurate i feel ;-). This is called ‘Securitisation’, where one book of secured loans is purchased by a company that did not originate them. The idea is that the seller, then has more money to either re-lend or go on a big trip to Vegas (usually the former). This used to be the major source of where money came from for mortgages.
This is a very sizable deal – £3.8 billion of lending, consisting of 23,000 borrowers. These sorts of deals used to be commonplace, but effectively stopped in the ‘credit crunch’ (in fact, it was this market closing that effectively created the credit crunch), so it is interesting that confidence is up and there is appetite for these deals again to mainstream players.
To give you an idea of the scale of the problem the closure of the securitisiation market caused, mortgage lending went from just over £350bn in 2007 to £140bn by 2009. So play that forward to today, the mortgage market will be around £320bn of new lending. So if we see this market rebound, that could add another £200bn a year into the mix…. The ins and outs of that is a whole subject in itself, but what I expect to see will be a loosening of policy and new players coming to the market. We are starting to see that now, so I am keeping a close eye on that and have a ticket to Vegas on standby…
Money Markets all creeping back up as sanity returns to the market. Last week – SWAP Rates – 2 year money is level at 0.790% and 5 year money is down to 0.760%. LIBOR was level at 0.784%. As ever, the current Brexit paralysis is overarching everything in this area at the moment and with things in quite a mess, no impetus to put rates up in the near time (by that, I mean the next 3 months). In fact, the market view is overly pessimistic now and 5 year money looks great value!
This is relevant as banks largely price their fixed rate mortgages off SWAP Rates, and variable rates off LIBOR. On both fixed and variable rates, lenders will typically add about 0.5% as a starting point to the rates above to create the mortgage products they offer. However, the rate you will be offered is heavily dependent on your circumstances and deposit/equity level.
2 Year Variable from 1.24%
2 Year Fixed Rates from 1.28%
5 Year Fixed Rates from 1.66%
BTL Rates from 1.40%