Accord Mortgages - Increasing SVR?!

opinions4u

Myssinic wrote: »

Why would it suddenly be so much more expensive to service a mortgage compared to a year ago, and by so much? Surely last year would have been the time to cite 'difficulties in the market'. I'm not a banker, but it seems like a pretty flimsy pretext to me.

If a lender has mortgage balances of, say £100m, and has raised all that money wholesale, various tranches of that money come up for renewal from time to time.

If, for example, £20m is due for renewal next year and Accord cannot get it renewed they are basically insolvent. That could potentially bring down the parent company.

To renew that funding with their wholesale funder they need to assure the provider of those funds that:

- arrears are manageable
- repossessions are manageable
- write-offs are affordable
- that there will be a return for the wholesale funder

Arrears and repossessions and, presumably, write-offs will have risen for a lender like Accord over the past 12 months. Indeed, unemployment is still rising.

The last lot of wholesale funding may have been provided at a rate of, say, 4%. This renewal could well be at 5%, reflecting the increased risk in the current market place for a mortgage book from a company like Accord.

If Accord don't raise their rates to their own customers they will not be able to pay their wholesale funders the promised returns. In this scenario the wholesale funders could say "we're not lending to Accord" and the business collapses.

Thrugelmir

Myssinic wrote: »

Why would it suddenly be so much more expensive to service a mortgage compared to a year ago, and by so much? Surely last year would have been the time to cite 'difficulties in the market'. I'm not a banker, but it seems like a pretty flimsy pretext to me.

I was merely attempting to have an educational conversation. As you have totally side stepped my original question. I'm not trying to catch you out either.

What you've said above actually goes off onto a totally different point.

If you are wondering , I'm not a banker, but have worked in , with, raised Corporate finance all my working life.

[Deleted User]

Thanks for that explanation, there's obviously a lot we don't know about!
But sadly for Accord, treating their solvent customers this way, whether they have a choice or not, will surely lead to more moving elsewhere.. it's a downward spiral for them methinks.

[Deleted User]

Thrugelmir wrote: »

I was merely attempting to have an educational conversation. As you have totally side stepped my original question. I'm not trying to catch you out either.

What you've said above actually goes off onto a totally different point.

If you are wondering , I'm not a banker, but have worked in , with, raised Corporate finance all my working life.

Well, clearly I don't know much about wholesale finance, and I doubt many people do, which is why I struggle to understand this decision. But even if I knew everything there is to know, it doesn't change the fact that a lot of people's mortgages are about to get a whole bunch more expensive for no apparent reason, and that's really all that matters.

I guess at the end of the day, I have a terrible lender and need to switch

opinions4u

Myssinic wrote: »

But sadly for Accord, treating their solvent customers this way, whether they have a choice or not, will surely lead to more moving elsewhere.. it's a downward spiral for them methinks.

There is another thread on this board about Beacon Homeloans who have stopped all new lending. I don't think Accord are taking on new customers either.

Because these companies now struggle to raise the finance to maintain their mortgage books it is often a deliberate strategy to price customers in to making a remortgage decision. In other words, it would suit them if you were able to take your business elsewhere.

There have even been case of lenders reducing balances outstanding to help customers to move to other lenders. £10,000+ is not unheard of. You could even ring them and ask them if they would do the same - it might get you in to remortgage territory!

MarkyMarkD

But that's a pretty inefficient way of doing it, IMHO. It makes a lot more commercial sense to simply increase variable rates and hence encourage those customers who are able to do so (i.e. who have equity and decent income cover) to remortgage.

IMHO if rates stay at their current low levels, this will happen to more and more lenders. For wholesale-funded lenders, there is simply limited money available and it is expensive for those with less than top credit ratings. For retail-funded lenders, the cost of retail funds has become completely disconnected to BBR.

It is interesting that in one set of threads on MSE people will be raving about retail savings rates of up to 5%, and on another set of threads they will be mystified that lenders are losing money lending at tracker rates of (say) BBR+0.39%.

It needs to be recognised that the two do not add up. Lenders will either report large losses - and I bet they're coming, when the building society reporting season gets under way early next year - or they will put up their SVRs because there is virtually nothing else they can do.

Joe_Bloggs

I have a view where that the charging the maximum amount of interest from a situation where there is little margin for variation in personal circumstance is a doomed enterprise.
Risk based interest pricing is perhaps a self fulfilling prophecy. If you force your borrowers to miss their own repayments through usurious interest rates then you will gain from what you reap. Your loan book will be dodgy and all you can hope for is to sell it to some unsuspecting numpty. Perhaps you can restore a balance by charging existing borrowers more ?
J_B.

[Deleted User]

opinions4u wrote: »

There have even been case of lenders reducing balances outstanding to help customers to move to other lenders. £10,000+ is not unheard of. You could even ring them and ask them if they would do the same - it might get you in to remortgage territory!

Wow - this I need to know more about!! Are there any links on how to go about doing it?

Thrugelmir

Myssinic wrote: »

Well, clearly I don't know much about wholesale finance, and I doubt many people do, which is why I struggle to understand this decision. But even if I knew everything there is to know, it doesn't change the fact that a lot of people's mortgages are about to get a whole bunch more expensive for no apparent reason, and that's really all that matters.

I guess at the end of the day, I have a terrible lender and need to switch

There are very explainable reasons for whats happened / changed in the mortgage markets since 2007. So much easier to blame the "banks" than anything else.

Your lender suited your needs to obtain a mortgage at the time. To get a better rate you need to work towards a better LTV. Takes time but nothing in this world is for free.

Thrugelmir

MarkyMarkD wrote: »

It needs to be recognised that the two do not add up. Lenders will either report large losses - and I bet they're coming, when the building society reporting season gets under way early next year - or they will put up their SVRs because there is virtually nothing else they can do.

Building society SVR's average nearer 5% already. Other than Nationwide all are dependent on retail deposits.

LloydsHBOS at end of September quoted 3.86% for the average funding cost of its deposits across the whole group.