Had a phone call from my Lender...

lemonjelly

wageslave wrote: »

I had a letter from my bank a couple of weeks ago offering me a loan because they are worried I may be suffering from a lack of luxury items I can't afford.

First I have had for ages.

This is fascinating wageslave! One of the first obvious signs of the so called crunch was a visible drop in the credit junk mail for loans, credit cards etc. I'm still waiting for it to pick up, but it is interesting to hear that people are starting to get offers of credit...

wymondham wrote: »

I'm more impressed they phoned you on a Sunday, which lender is it?

:rotfl:
Surely you can't suspect the OP is fishing?;)

princeofpounds

They buy the money at todays rate don't they? Therefore, whether they think rates will rise of not is neither here nor there. They have calculated a profit margin on the rate they have offered.

No. Simply put, when a bank prices a fixed rate mortgage, they do so off something called the yield curve, which are market expectations of interest rates into the future. They add on a profit margin too of course.

ginandtonic1988

Lender is Brittania, I currently have 73% loan to value, the deal is matching exactly what I have now that runs out in 2012 but they want to tie me in until 2015. Interest rate is 5.34%

I like the certainty of a fixed rate as I was badly bitten in the 1990's recession I've never been on a SVR.

Charterhouse

HAMISH_MCTAVISH wrote: »

Banks typically have to roll over the money they borrow every couple of years.

If they expect rates to be at 15% in 2 years, there is no way in hell they'd fix at 5% for 5 years now.

I am so glad that you have demonstrably proved once and for all that you have no clue of how the mortgage industry works.

They can lock this in right now, not a problem. 3yrs starting 2yrs fwd trades around the 4% mark off the top of my head, so they are locking a decent profit on a good client, since the OP has a reasonably low LTV and good credit record so far. His loan is what is known as seasoned, and therefore I would think they'd probably go a little lower.

FWIW I think it's more likely that they are trying to get the OP off a contract that at present rolls onto an artificially low SVR + rate. My Woolwich 5yr fixed rolls off onto base rate +0.90% despite it just being a regular fixed. Not sure why that is, but I would not be surprised if they'd do something like this to get me onto a new contract that rolls onto their normal SVR which is much higher. Call me a cynic.

chucky

Charterhouse wrote: »

I am so glad that you have demonstrably proved once and for all that you have no clue of how the mortgage industry works.

They can lock this in right now, not a problem. 3yrs starting 2yrs fwd trades around the 4% mark off the top of my head, so they are locking a decent profit on a good client, since the OP has a reasonably low LTV and good credit record so far. His loan is what is known as seasoned, and therefore I would think they'd probably go a little lower.

FWIW I think it's more likely that they are trying to get the OP off a contract that at present rolls onto an artificially low SVR + rate. My Woolwich 5yr fixed rolls off onto base rate +0.90% despite it just being a regular fixed. Not sure why that is, but I would not be surprised if they'd do something like this to get me onto a new contract that rolls onto their normal SVR which is much higher. Call me a cynic.

wouldn't that depend on the lender though - traditionally some would use forward swap rates and others Libor to fund dependent on their position.

aren't the fixed rates bought in tranches off the swap markets?

Charterhouse

Apart from the smallest building societies yes fixed rates are hedged in the swap markets and you can easily use forward swaps to hedge this in. Otherwise they could also go to the original swap counterparty and get a price to extend the original hedge.

Graham_Devon

Rock on, I was right

Just thought hamish was being majorly disingenuous on the base rates thing, thats all!

chucky

Graham_Devon wrote: »

Rock on, I was right

Just thought hamish was being majorly disingenuous on the base rates thing, thats all!

probably the lender is the Brittannia - it depends how they funded the fixed rate tranche. if it's off the swap market it would be what the swap rates are. if it's off Libor it would be closer to the BOE base rate.

i reckon as (Charterhouse confirms) they must buy in tranches as they're not a small lender.

Dr.Shoe_2

I would ask them what their current 2% tracker rates are at the moment and then tell them that I'd be happy to fix at 4.95% for the next five years and see what they'd say.

ginandtonic1988

Dr.Shoe wrote: »

I would ask them what their current 2% tracker rates are at the moment and then tell them that I'd be happy to fix at 4.95% for the next five years and see what they'd say.

Good thinking Dr Shoe I had already asked the question and there is no room for manouvre (SVR is 4.24%)