Bank margins reducing as competition returns to the market....

HAMISH_MCTAVISH

Exactly as predicted.

Coventry Building Society has unveiled a range of new residential and buy-to-let mortgages with rate cuts of up to 0.50 per cent.

Highlights from the new range of products include a market leading Flexx for Term mortgage at a rate of 2.0 per cent with no early repayment charges (ERC’s). This comes with total fees of £999.

For borrowers with a deposit of 35 per cent, a five-year tracker rate mortgage deal at 1.99 per cent, 1.49 per cent + the Bank of England base rate.

http://www.myfinances.co.uk/mortgages/2013/10/31/coventry-bs-cut-btl-rates-and-unveil-cheap-5-year-tracker

I expect margins will continue to shrink as more competition returns to the market, and hence any future rises in base rate will be nowhere near as onerous as the usual suspects like to portray.

michaels

Some very interesting rates - makes my 5 year fix look not quite such a good deal...except that expected first BoE increase has moved forward quite considerably since I fixed.

Thinking out loud I wonder if the predicted BoE move coming closer makes it easier for banks to offer lower margin trackers as they also expect margins to tighten as rates increase?

HAMISH_MCTAVISH

michaels wrote: »

I wonder if the predicted BoE move coming closer makes it easier for banks to offer lower margin trackers as they also expect marings to tighten as rates increase?

I think it's pretty widely accepted that it will happen.

Merv stated exactly that to the Treasury select committee last year.

Most analysts seem to agree.

It's difficult to envisage a set of likely market conditions that would see the banks able to preserve or increase current margins above base as base rates rise.

Thrugelmir

Judging by this week's 3rd quarter results bank margins are widening.

However are lending less.

Kennyboy66

Thrugelmir wrote: »

Judging by this week's 3rd quarter results bank margins are widening.

However are lending less.

Don't let facts get in the way of Hamish's panglossian view of the world.

Most decrease in mortgage margins has already happened on high deposit mortgages and some has already happened at higher loan to value loans.
The biggest driver has been cheap funds via BoE Funding for Lending scheme. Some day (January 2015) this crutch will be removed.

Kennyboy66

michaels wrote: »

Some very interesting rates - makes my 5 year fix look not quite such a good deal...except that expected first BoE increase has moved forward quite considerably since I fixed.

Do you mind me asking how much you are paying - just mulling over a 5 year fix myself (currently on base plus 2% with Nationwide).

michaels

I was on base plus 1.99 tracker and fixed 61 months at 2.49% with 1500 fee but free legals and valuation. Not sure if such rates are still available - perhaps 2.44 with YBS still live but they are strict on multiples with dependents and no IO wich I went with.

Thrugelmir

Kennyboy66 wrote: »

Some day (January 2015) this crutch will be removed.

Lenders have it all sewn up with the follow on rates once the fixed product term ends. Borrowers get drawn in with the belief that they'll be able to remortgage elsewhere.

michaels

Thrugelmir wrote: »

Lenders have it all sewn up with the follow on rates once the fixed product term ends. Borrowers get drawn in with the belief that they'll be able to remortgage elsewhere.

If they stop giving me money that I can invest elsewhere at a higher rate I will be forced to...pay it all off