There didn't appear to be a great deal happening last week other than the continuing spat over home information packs and what I suspect have been the largely unsuccessful attempts by the pack's supporters to prove the scheme still has some legs and isn't crawling on its knees towards an early grave.
The Association of Home Information Pack Providers (Ahipp) tried valiantly to convince us Hips were still going to become a reality next summer.
“The pressure is now on the government to confirm its support and to push through the licensing of qualified Home Inspectors to enable a fair testing of the voluntary take up of home condition reports,” said Ahipp.
Presumably that pressure is coming from Ahipp – which remains convinced Hips and in particular the home condition report “are both great news for the consumer.”
It may have a job convincing everyone else in the industry of the merits of the packs and, all things considered, if it was confident the government was still behind the scheme I would have thought it wouldn’t feel the need to make statements about Labour being under pressure to confirm its support for it – or is that just me?
So a quiet week all in all at least until Thursday lunchtime when we all got a bit of a surprise.
I think it’s probably fair to say there weren’t many people expecting a rate rise from the Bank of England last week. I certainly wasn’t, I had already written the story for the website on the basis the Bank wouldn’t shift the rate just yet and I even sent out the IFAonline email a little early on the basis the BoE was unlikely to do anything interesting again this month.
What sadly comes as no surprise, though, is lenders have already reacted to the interest rate rise. This will no doubt come as a nasty shock to the 38,000 people who took out a tracker mortgage in June - the Council of Mortgage Lenders rather helpfully revealing this morning the number of people taking out a tracker mortgage increased by a whopping 24% ahead of the change in rates.
It’s not the first time I, or I’m sure many people, have noticed lenders usually react quicker to a rise in interest rates than they do to a cut.
What tends to happen is lenders take about a month to react to a cut in interest rates so while the Bank of England lowers the base rate at the beginning of the month it’s not until the start of the next month the lenders follow suit – and in some cases it’s longer. A cursory glance at just a couple of lenders reveals they have already reacted to the rise in the base rate and raised their own standard variable rate among others.
This is not wholly to be unexpected, after all lenders have margins to deal with and it’s a fiercely competitive market out there at the best of times when, let's be honest, at the moment for lenders they are not.
Most borrowers still appear to favour fixed-rate mortgages at present, despite the sharp rise in those taking up tracker mortgages - suggesting there is still a degree of uncertainty over which way (or maybe how high) rates will go - but at the same time it’s a little inconsistent of lenders to raise their own rates almost immediately in response to an interest rate rise and yet make their customers wait an additional month to benefit from a cut in interest rates.
It looks like penny pinching and it’s a practice which really ought to be jettisoned. The other question to be asked is whether this is treating customers fairly when the lenders take much longer to bring their rates back down?
What is often also forgotten is this reaction to rate rises is one of the contributory factors to brokers moving their clients to a different lender where possible.
Lenders often complain about the level of churn in the industry and put the blame squarely on the shoulders of mortgage intermediaries – but maybe they should be taking some of the blame themselves if they then take so long to cut interest rates for their existing customers.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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