You could hear the audible sighs of relief from all around the UK as the starting gun was officially sounded on what will no doubt be a close, fiercely fought and no doubt tetchy campaign. I still believe the 3 TV debates will be absolutely key to deciding who will form the next government.

Hopefully once all the uncertainty is out of the way things can start getting back to some semblance of normality and whilst there is a small matter of a few quid deficit to pay back, things tend to move forward once we know exactly what we are dealing with. It is the uncertainty that stifles everything.

In the meantime we can only try to get on with business as usual and whilst purchases may dip slightly before the election this could be replaced with the slowly returning remortgage market. After all, a new government may have new policies that mean interest rates have to rise and fixed rates are very competitive at present.

Competition amongst lenders is still growing nicely and hopefully this is set to continue, although some still harbour fears of a shortage of funds to lend out in the latter stages of the year. If this does begin to happen you can wave goodbye to the really attractive rates available now.

However, we live in hope that this can be averted and careful tranche management by a number of lenders should ensure a steady flow funds throughout the year. Of course, post-election anything can happen, but no government is going to want to see lending to individuals and businesses dry up even further than it already has.

It is interesting to see that Australia has raised it’s interest rates again as it tries to cool the pace of their recovery and keep a lid on the housing market and inflation.

The change in mood can already be felt, May will be here and gone before you know it, finally some decisive action can be taken, the World Cup is also around the corner and by heck it even feels like Spring today.

With the General Election looming these figures suggest that property purchases will continue to tail off until a new government is firmly in place and people know who, and what, they are dealing with.

While we may see a slight uplift due to stamp duty changes for first time buyers and people buying property above £1m wanting to move before the year is out, this is unlikely to occur until after the next Budget.

It’s encouraging to see that remortgages are up. More and more homeowners, who have been sitting on an SVR for some time, are starting to remortgage while rates are still as low as they are. In many cases, increased lender competition has pushed rates down to levels that are below many SVRs, so it makes sense to remortgage.

Borrowers are aware that the current low interest rate environment will not go on forever and that it may be good to remortgage now while they are still ahead.

However, activity picked up towards the end of January and into February so we expect to see stronger figures from February on until they begin to tail off again in the second half of the year.

January’s figures shouldn’t dampen the spirits as the mortgage market has got off to a flyer compared to this time last year, with hundreds of new products hitting the market and enquiry levels rising dramatically.

Many people have put their lives on hold for two years and increasingly seem to have decided that now is the time to make that move, or hedge against future rate rises.

As competition has seeped slowly back into the market, lenders are being forced to look beyond the 60% Loan-To-Value and below market, which is now saturated. They are starting to venture into higher LTVs and are even returning tentatively to the buy-to-let arena in search of higher margins.

But let’s not be under any illusions here, the mortgage market, like the economy, is still in the very early stages of recovery and could be set off course by any number of external factors. But in the meantime, now is the best time in a long time to take advantage of some highly competitive products.

The political soothsayers have been having a field day showing how we were the first into recession and the last out, and that the road ahead is going to be a frankly tortuous affair. Even Alistair Darling could not rule out the possibility of a dip back into the negative almost on the eve of the election.

The fact is that many economists have been caught a little short yet again with the apparent weakness of the recovery and there will no doubt be a lot more scratching of heads and gnashing of teeth in the days ahead.

So where does that leave us all? Well, I like to think I am a glass half full type of guy, (though my wife may disagree), and to be fair a 0.1% rise is a hell of a lot better than a 0.1% drop or a big fat 0! There is hope!

In fact, the International Monetary Fund, (IMF), has just raised its projection on how much the global economy will actually grow this year. It expects unemployment to stay roughly at the same levels, however they also stated that “a key risk is that a premature and incoherent exit from supportive policies may undermine global growth and its rebalancing”.

Meanwhile the World Economic Forum in Davos has begun which should provide an interesting boxing match between bankers and regulators, with many bankers railing against the Obama plans in the US already.

It is likely to be a heated few days, but everyone needs to understand that for the financial industry to move forward with confidence there needs to be a balance between financial institutions competitiveness and effective regulation.

Too much weight on either side could only add to the issues.

Meanwhile, the mortgage market seems to have a little spring in its step if early enquiry levels are anything to go by. More products are popping up left, right and centre and lenders are starting to get back to doing what they should be doing, lending.

I don’t expect too much to change leading up to the election, with the main issues potentially coming with a hard budget by the new Government, whatever the colour. Together with the end of support like the car scrappage scheme and Quantitative Easing, as well as measures to start cutting the deficit there are some undoubted tough times ahead.

Whilst we all want decisive action to get us out of this mess, as with any issue, there is a danger of being too decisive and over-correcting.

Whether we will indeed be limping for a generation remains to be seen, so sing us out Dr Robert, sing us out.

Most lenders seem to have got in on the act with some competitive tracker products and fixes as well as more higher loan-to-value products making an appearance.

This is of course good news for consumers and mortgage brokers alike as more choice comes back into the market. The one thing to watch, however, is the continuance of not just some strict underwriting policy, which is hard to really argue against, but some more “unfair” policies if that is the right word.

As usual it seems that the self-employed often bear the brunt of this, and one particular rule adopted by a couple of lenders is that of the effect a reduction in net profits have. For example, take an equity partner in a leading law or accountancy firm who earns a share of net profit. They earn six figures and the net profit of the main multinational firm runs into millions. Obviously we have just been through one mother of a crunch, just emerging from recession so many businesses have had a down turn in figures.

So, this firm has a slight downturn in net profits which means the partner’s share of equity reduces by no more than a few thousand, i.e. less than £10k. At least one lender stated they would not lend because net profits had reduced! Of course they have, is this not expected given the financial turmoil of the time?

It seems unfair to say to self-employed people if you have a good established business and you have just had a dip due to world events that you would not lend at all. Many employed people have agreed to take a cut in wages or bonuses to see themselves through and keep a job, but they are not told they cannot get a loan at all.

At least base it on the reduced figure, as you would on an employed person’s current salary, rather than having a broad stick approach of we can’t lend! Am I wrong to think that? Surely this downturn is all expected and does not mean that every self-employed persons business is going down the tube? Many of these people are safer bets than an employee who could be shed at any time, and I am not talking about those in a new business with no accounts, but long standing businesses that can show years of audited accounts!

I also understand why some lenders still seem to be carefully cherry picking those clients they want to lend to, but would rather see sensible reasons written into a policy rather than making more random excuses.

It is all very well to have tighter criteria, but there does need to be some common sense attached rather than a computer says no approach. It is a shame that some good people are struggling to take advantage of the low rates at present, whether trying to buy their dream home or trying to remortgage onto a fixed rate in the face of a potentially rising rate environment.

While no-one wants a return to the lax policies of the past when a passport and a smile got you a large mortgage loan, there is still room surely for a sensible middle ground.

I would say, however, that this does mean many more people seem to be coming to Professional Mortgage Brokers for proper advice after having had issues direct with lenders; so as they say, every cloud…

I guess that is why in much online writing and message boards many use the kind of annotation symbols I used to find rather annoying but have now embraced with glee, you know the ones; lol,
:-0)* (no idea on the last one, but you get the idea).

Anyway, the point is that because much of what I write, certainly in the banter with colleagues over company issues, is tongue in cheek, I think I am going to have to go further and start annotating my expressions after almost every line. Maybe I should do that with all my writing so people understand the tone in which I am addressing them.

In fact maybe all people in business should do that, and it could be very useful in our own industry. I would love to see new rate release emails from lenders with a bit of honest annotation, as well as some media releases.

Go on, try it

I know you may well be asking what is mortgage related about that, but not everything in this blog needs to be about that does it (genuinely furrowed brow)? I often think my best blogs are when someone says to me, “what the hell were you on yesterday?” (self-obsessed smirk as if anyone actually reads this).

But, talk about mortgages I shall (stifling yawn), after all that is ostensibly what I do!

There does seem to be a bit more get-up-and-go about the market at the moment with a plethora of new product releases, some of which fly in the face of recent SWAP rate increases, especially on a fixed rate basis. Lenders do seem to be a bit more relaxed about the future and are starting to concentrate on the core business of actually lending money again, (about bloody time to).

Whilst there is an undoubted return of a semblance of competition to the market, I still feel it is highly likely that the fixed products available in the first part of the year will be better than those available in the latter.

It was also a little bit sad to see the Abbey and Bradford & Bingley brands disappear into the ether of the past and it is a shame to lose something so quintessentially British , certainly where B&B were concerned.  However, Santander is a strong brand with a good reputation and I like what they have been doing, (slight crawl).

Anyway that’s progress folks, something we badly need and I am all for that.

QXRSUDQZ6FTK for all those wondering this is my Technorati claim reference I have to post into a blog – I don’t really know why either

One of the main areas of concern was not just the confusion that surrounds rates at present but the fact that some lenders have actually already started putting up their Standard Variable Rates, (SVR’s). To be fair this has generally been the smaller Building Society’s such as Mansfield and Cambridge but it does highlight the perils of staying on a lenders SVR.

These institutions have an issue. They claim that they need to do this in order to compete with state-assisted banks, as they have a delicate balancing act. Arguably it is more important at the moment for them to attract savers rather than lend money, and therefore they need to up their savings rate to attract business. Basic business sense means they can’t have high savings rates and low mortgage rates so mortgage rates need to increase.

As lenders seek to address their balance sheets it will not be surprising if more mainstream lenders also follow this trend. So again, it is important for consumers to look not just at the headline rate they may be getting now, but also to look at what the lenders variable rate is doing – at present we have SVR’s ranging from 2.5% to 6.45%! I would also tend to keep away from products discounted off the lenders SVR and stick with trackers.

There is however, some argument that in the medium to long-term the difference between the Bank Base and the lenders SVR will start to shrink again. In other words will we really still see SVR’s 5% higher than Bank Base once Bank Base is up at 4% again?

So, some economists believe we will still be at 0.5% by the end of the year whilst others see us at 2.5%. That is a big difference of opinion and I was also asked where I sat on that. To be honest I do believe we will see a change by the 3rd quarter of the year, and see a Bank Base of 1% to 1.5% by the end of the year.

I put a proviso on that however. Firstly that there is a decisive election outcome, a hung parliament helps no-one, and that there is no double dip recession.

Either way, even if competition does return to the mortgage market, and there is a lot of evidence to suggest it will further, it may well be worth reserving a product now at the very least as you may not be able to get such good products as you can now.

After two long hard years of credit crunch and recession, with another tough year approaching, who is to say that it is not a good thing for the public to let off some steam and vent their anger, whether misdirected or not, at “the machine”, or the systems that tell us what we should be doing and thinking?

Many of us may be feeling bitter about being let down by people blinded by power, money and glory who refused to accept the realities of how things were changing. The financial crisis has affected every walk of life, many losing jobs and only low interest rates keeping them in their homes. Whilst banks start to make profits again, it feels like a kick in the teeth as the everyday borrower and business still finds it hard and costly to borrow.

Before you think this is an anarchic, communist rant my comrades, it isn’t. In fact, just lashing out at bankers for example, without any thought of the effects is not the answer. Are the everyday bankers who work long hours under enormous stress and treated in a way that the average worker would not tolerate really the ones to punish? After all, MP’s literally took money out of our pockets with ridiculous expenses, whilst Governments globally and regulators failed to spot the risks.

Taxing the banker’s bonuses now will not have the desired effect. It may mean that they set up shop elsewhere, as in this technological age borders mean nothing, which could have a devastating effect on the wider economy. Businesses of all types rely on the banks making money to lend out, on those with high disposable incomes to buy their goods and services, and social services depend on the tax revenues earned out of these people. Every business in the land is in some way affected if our financial sector is not performing.

The London housing market will also be effected which will trickle through to many other areas if demand starts to wane.

I am sure there are other possibilities, rather than just simply taking an “after the horse has bolted”, vote grabbing approach. Will a simple tax stop banks taking unnecessary risk? Or will it just stop it in this country, which given globalisation means we will be affected again anyway?

It needs a sensible approach, based on communication, regulation and common ground. Make the UK the best, safest place for banks to operate in and work to benefit all of us.

Far better to take out rage at the ballot boxes, getting rid of cheating MP’s and buying a simple song that expresses our feelings this Christmas, “Killing In The Name Of” by Rage Against The Machine, the official anti X-factor song.

It is nothing against the marvellously talented Joe, but seriously, give the guy some decent music to express his talents and give us something a little different this Christmas. Something that appeals to the rebel in all of us and sends a message.

As far as 3 month LIBOR is concerned this was always the reason that lenders used for not lending during the height of the credit crunch when it was artificially high. Now, according to Moneyfacts, “Three-month Libor is at 0.55 per cent, while the average two-year tracker rate is 3.76 per cent. Two-year swaps, which lenders use to fund fixed-rate mortgages, are at 1.84 per cent, compared with the average two-year fixed-rate deal at 5.13 per cent”.

Now regular readers will know that I understand this is not quite so simple any more, as lenders have to take into account toughening capital adequacy requirements, increasing costs of funds based on perceived risks and the increased costs of attracting savers. In fact there is no doubt that the relationship between LIBOR and funding in its most simplistic sense has changed, perhaps for good like many other economic theories we have seemed to rely on.

However, I still believe there is some leeway and whilst some banks can obtain funds at cheaper rates than others, see the latest HSBC, Abbey and Woolwich products, I am sure more can be done if they really wanted to. In a report last week lack of demand was highlighted for a reduction in lending, but in truth I just do not buy that as demand is not as weak as we are led to believe.

Some positive news on the funding front was the first European securitisation deal for more than a year taking place, with Lloyds issuing an AAA rated mortgage-backed bond equivalent to £4 billion!

As Robert Plehn, head of structured securitisation at Lloyds Banking Group, said “This offer was significantly oversubscribed…we believe we have taken an important step towards helping reopen the European securitisation market.”

This could indeed be a very significant development.

So what of the best and worst mortgage lenders according to Which? In the top 5 for the best we have First Direct, One Account, Coventry, Britannia and the lovely Nationwide. Well done to those with the top 3 all scoring 5 out of 5 for customer service. HSBC as expected did well on rate but scored relatively poorly on customer service and came in 7th out of 17.

So the 3 worst offenders who must try harder? Halifax, Northern Rock and Abbey. In reality only 2000 people were asked and the results were quite close, but it is interesting to see these reports and illustrates to me how using a mortgage broker can help you bypass much of the service issues those going direct tend to experience, as some of those who scored lower on service we do not seem to have an issue with at all.

The Chancellor is looking really mean and determined this time, and I reckon Ali D will be giving it to them both barrels like a streetwise, no nonsense gangster rapper.

As I am obsessed with the brilliant Flight of The Conchords at the moment I thought it may go something like :-
 
I’m the mother flippin’
High Chancellor, I ain’t kidding ya
I’m here to get banks to lend more to ya
I ain’t flippin around this time
Y’all better heed my rhyme

When times were good you got too greedy
With your CDO’s you screwed the needy
You gave ‘em loans they couldn’t afford
And put idiots on your boards

So I’m here to make you pay for your crimes
Don’t mess with me, ‘cos if you cross the line,
I’ll do stuff you can’t erase,
Like when I put Gordo in his place.

I’ll regulate you to the max
On your bonuses I’ll hike your tax
Don’t give me shi about the cost of funds
We just bailed you out with cash by the tonnes  – (it’s hard to rhyme funds!)

So tell me straight, don’t be sittin’ on fences
I didn’t get where I am by fiddling expenses
How much you gonna lend today
D’ont make me take my ball away

I ain’t in to cussin’ or making a fuss
But you mother flippers better get on my bus
‘Cos I ain’t stopping, well, at least ‘till the election
All this power gives me an erection

I’m the mother flippin Ali D – yeh you know me (repeat to fade)

Faced with that I am sure the banks would of course respond by doing the Chancellors bidding.

Alternatively, they will reply to the tune of Rappers Delight in a Sugerhill Gang kinda way, but I’ll leave that one to you.