My first reaction was if that was the best idea he can come up with then we are all up the proverbial creek without a you know what. In reverting back to an oft tried and never achieved call for 30 year mortgages we suddenly saw that actually, no one in power at least, seems to really get the issues.

Alastair Darling said much the same thing in 2007 and was duly obliged by a couple of lenders offering 25 year fixes at the 6.39% level. Of course there was not much take up due to the onerous penalties in the first 10 years and the additional cost, but for those that did, well it’s looking a tad expensive now.

But still, Grant Shapps said to the Building Societies Association that “Longer-term mortgages – possibly as long as 30 years – could help families on tight budgets know exactly where they stand when they are buying a home, by giving them greater certainty over how much they will be paying for their home in years to come.”

As with any advice, the problem is that for most real clients, a 30 year fix is probably not the best advice. Budgeting is all very well, but as those tied in to the previous offerings will no doubt tell you, it sometimes isn’t all it’s cracked up to be.

In today’s ever-changing times with a transient work-force, births, divorces and the like, some kind of flexibility is required and having a long-term fix with expensive tie-ins means that those who are looking to move are tied to the lender they took the product with. This may not be the best lender when they need to move or borrow more.

Mr Shapps also suggested that to get over the redemption penalty issue, lenders should cost them in to the interest rate. Ok in theory, but in practice this just makes the differential more expensive. Just a quick glance at 10 year fixes available at present, (and there are only 4 lenders I can see offering 7 such products), there is only one Skipton, who offers this at 85% LTV at a rate of 5.85%. Penalties are a massive 6% in the first 5 years.

The challenge for lenders, as always, would be to produce a cost-effective very long term fixed rate, with flexibility built in. Then you may see demand for such products rise, although not by a great deal.

So when you actually sit in front of a client and explain the pros and cons then go through the cost differentials, the majority, although not all, will opt for a cheaper and less onerous 5 year product.

My final question is what exactly, by calling for the introduction of such products, does Mr Shapps hope to actually achieve? It will not cure the issues we have in the property markets; it will not mean more homes are being built; it will not help a workforce that may need to move to where the jobs are and it most definitely help increase flexibility to deal with whatever life throws at you.

If anything it could stagnate the market further and mean that those who are on a tight budget end up paying more than they actually need to.

Whilst a healthy market undoubtedly needs a good mix of products to cater for every aspect of personal choice, there are surely more important matters to be concentrating on. Overhauling Stamp Duty, for example, would be a much better place to start.

First tried back in 1961 as an “experiment” whose results are still disputed, this involves the Fed selling short-term bonds and, here’s the twist, replacing them with longer term ones. The result is that as more long-term bonds are purchased interest rates should fall, (it’s a supply and demand thing, sort of).

So whilst the US relies on Chubby Checker to help lift them clear of another dip into recessionary squalor, the question is what affect will it have on us? The markets seem initially to be unconvinced, as whilst the yields of 10 year bonds will fall, recent studies suggest that last time the actual effect on mortgage rates and actual borrowing costs was negligible and, let’s face it, interest rates are already very low, so our problems run deeper.

The key to this policy is that no new money is put into the system, so it is crucially different to Quantitative Easing. If SWAP rates do fall accordingly as a reaction to this then great, but will this actually stimulate more lending to individuals and businesses?

Back at home the Bank of England’s MPC, now all firmly singing from the same hymn sheet, are contemplating a new round of QE themselves to help stimulate things, with November the favoured date for another £50 billion or so.

As far as the beleaguered UK housing market is concerned there are deeper issues still and we need some radical thinking and one or two experiments of our own.

Housing policy needs a radical overall, builders need to be supported, a North-South divide is getting more and more pronounced and the social issues that arise with a population unable to move are far reaching. Local Authorities are struggling to meet their social housing allocations and homelessness continues to grow, which is shameful in this day and age. Housing is in danger of being the preserve of the well off or the fortunate.

The strange thing about our industry, however, and one that is contradictory is that it feels better. Is that just because broker numbers have fallen so dramatically that there is more to go round? Most brokers I speak to say that things have picked up – is that just a London thing?

One pleasing aspect for us brokers is not just the fact that lenders are now tapping us on the shoulders and asking for more business but the return of the smaller building societies who, not able to just compete on price, are looking for new ways to lend again.

These lenders are able to eschew the frustrating tick box mentality of those banks who claim to offer the very best rates, (the reality being that clients are victims of the long, drawn out, “Yes, Yes, er No” approach), and instead offer the ability to discuss trickier cases with a real decision maker on day one.

If the property market is to kick forward once more, then this lending is essential in the new world where credit and risk rules the roost.

Whilst the threat to all of us is a second retreat by lenders triggered by, for example, a further disintegration in Europe or the mighty US twisting too far we all end up shouting, we need to make sure that as an industry we are heard louder than ever.

We need new ideas and some radical thinking to meet the challenges we face.

As predicted, the first major release of the year in this sector already looks like a beauty, coming from the company that were synonymous with professional landlords before the credit crunch, Paragon.

Paragon has launched three two-year tracker products, with rates starting from 3.30%, and a three-year tracker mortgage at 3.60%. In addition, the buy-to-let mortgage specialist has introduced three two-year fixed rate mortgage products with rates starting from 4.25%.

Loan-to-values, (LTV’s) across the new products range from 60% to 75% and all products have a 2% fee, which is importantly CAPPED at a maximum of £2,000 where many other lenders have high percentage fees.

Together with a realistic rental calculation based on 125% at a nominal interest rate of 5%, this is especially useful for large mortgage loans up to £1,000,000 on High Net Worth properties.

The products are available for single, self-contained properties and applicants are required to have a minimum income of £40,000 per annum. Applications must be received by 31 March 2011 and the mortgages have to be completed by 31 May 2011.

With other lenders looking to re-enter the buy-to-let market over the coming months this is a good start to what will be an interesting year for those looking to invest in property.

Some of us have already been talking about this since the start of the year, and it is nice to be backed up by some weighty reports. Moneysupermarket.com, for example, have stated that even when taking the new mortgage product arrangement fees into account the “best” fixed rate and the “best” tracker product over 2 years will beat the majority of lenders SVR’s.

With a lot of publicity around those mortgage lenders who have already increased their SVR’s recently and other lenders rumoured to be following suit, many borrowers are looking to mitigate the risk of further rises and taking advantage of some great fixed rate product offerings.

Others are finally jumping on the much trumpeted Offset bandwagon, with offset tracker rates below 3% currently this is a marvellous time to really make the offset work and shed years off the mortgage term.

Of course, it is important to note that whilst this is the case, generally speaking this only applies to those with at least 25% equity in their properties. Whilst this area of the mortgage market will always have the very best headline rates, the continued squeezing of lenders in this area has meant that some are beginning to look further afield for higher margins.

We have therefore seen not just an increase in mortgage products available at higher loan-to-values, with 90% LTV looking like the new 100% LTV, but also lenders are returning to the large loan and buy-to-let arenas.

The buy-to-let mortgage market is most interesting, as this seems to have started to return much quicker than many expected with lenders such as BM Solutions and The Mortgage Works actively looking for new business. BM Solutions have also made a tentative step at reducing the high percentage  Arrangement Fees that discouraged many and have reintroduced products with competitive rates and much lower, flat Arrangement Fees.

There is however, one potential drawback of this policy. The cost to lenders in terms of capital adequacy requirements of lending in perceived “riskier” areas or at higher LTV’s, means that overall lenders may have to lend less in pure volume terms. This is a worrying thought as lenders are not exactly throwing their, or rather our, money around at the moment.

Overall, it is nice to have a broader spread of mortgage products back and I suspect that lending will continue to ease, albeit it slowly over the remainder of the year. Whether rates remain this low remains to be seen, however, and I do believe that the first half of this year will be the best time to remortgage, potentially for quite a while.

Whilst there are suggestions that this spike in inflation has been expected and is merely temporary, it is unlikely to drop off sharply if recovery does continue to grow and will undoubtedly put pressure on the Bank of England to seriously consider finally raising interest rates.

This is a real shot across the bows for borrowers, many of whom are quietly banking on a low interest rate environment in the short term. But this is a risky game to play.

More people than ever are on variable rate mortgages at present, either because they cannot remortgage or because they have decided not to given the discount on variable rates relative to fixed.

If rates do indeed rise to contain inflation then many borrowers will find themselves with significantly higher monthly payments and many borrowers who should be fixing may well be leaving it dangerously late.

The prices of fixed rate mortgages have fallen slightly due to an increase in competition in the mortgage market, although this trend could well reverse given today’s figures.

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

A return of competition to the mortgage market, a rise in interest rates, further property price increases, the return of first-time buyers, a new Government, a world cup win? There are many questions to ponder.

Already we have seen a couple of positive reports; one by the Chartered Institute of Purchasing and Supply suggesting that the UK’s Service Sector had enjoyed the strongest growth in new orders for two years, and another from Zoopla.co.uk stating that house price confidence has returned to levels not seen since before the credit crunch. This states that 81% of people expect house prices to rise in the first 6 months of 2010.

On the other side of the coin, however, we also have Nationwide’s monthly index of Consumer Confidence falling by its sharpest margin since November 2008, as many continue to worry about job security and tax increases. The full scale of the public debt means that most people are fully aware that there is considerable pain to come, whoever wins power in the forthcoming election.

Political posturing began in earnest on the first day back and does anyone else have a feeling that this campaign is going to be a messy business on all sides? The only thing to look forward to is the planned series of televised debates between the Party leaders which is well overdue and if nothing else should make some entertaining viewing. To be honest I am yet to hear anything particularly “vote-winning” on either side as yet, but we live in hope!

For most in our industry I suspect the first quarter of this year will be a crucial one and I hope we do not see any other casualties.

Wishing you all every success in 2010 and remember, as Frank Lloyd Wright said, “The thing always happens that you really believe in; and the belief in a thing makes it happen.”

Talk on the economy has really been dwarfed this week by, of all things, and as our waitress this morning so eloquently put it, by Tiger bloody Woods. Seriously, it is wall to wall coverage now the blizzard is done.

USA Today had an interesting article that 30 year fixed mortgage rates had fallen to their lowest rate for ages which is starting to kick start re-financing, although several commentators are still to be convinced about this.

There does seem to be a view, in the coverage I have seen at least, that whilst the worst is over for now, more issues are to come especially when talking about how to wean everyone off the “financial stimulus”.

Unemployment is still high here but recent jobs figures suggest this has eased, albeit slightly, down to 10%. On top of this the average working week in terms of hours worked increased by the biggest margin in 3 years, showing that those firms who cut down capacity are starting to increase hours again, in turn boosting wage packets.

Another boost was that the number of temporary workers increased by the largest amount in 5 years, which can be seen as a precursor to firms taking on permanent employees once more. Inventories at U.S. factories also increased for the first time in more than a year in October, while factory orders also rose an unexpected 0.6%.

However, bank closures are still going on here, with another 5 being shut today which brings the total in 2009 alone to 130 banks that have been forced to close. Meanwhile individual states in the US are already raising taxes in order to fight budget shortfalls.

What really strikes me is just how politicised everything is over here, much more so than in the UK, and there are many who question every single stat and put their own spin on it to the nth degree.

In the UK we often look across the pond as a sign of what is to come in the short to medium term, and the news from what I can see is we all need a huge slice of realism. Whereas the next few months may represent a welcome lull and some definite silver linings and opportunity there is still an awful lot of pain to go through which may not show itself until the latter part of next year.

The good news is that for many smaller firms in the US, they have proved more robust than many feared and are starting to adapt to the new world and try to take advantage of the opportunities.

Back in good old Blighty I see a similar pattern emerging, and one that has no doubt been repeated in the immediate aftermath of every financial downturn. Newer, small/medium companies will take the opportunity whilst larger, more unresponsive companies will struggle to change in time, partly through arrogance, partly through their treatment of their staff, and partly through difficulties in cutting and manoeuvring that size brings.

The property market is slowly beginning to recover in the US, and in the UK I expect this recovery to be slightly quicker, simply due to supply and demand, especially in London and other areas of greater demand.

Whilst we do have a long way to go, the signs are there that if the move away from the stimulus packages around the world are handled correctly and sensitively things will slowly recover without too many serious glitches. If Governments handle this transition poorly, and there is a great deal of pressure on the next incumbents’ to Downing Street, they may be reaching for the red phone to say not Houston, but Washington, we have a problem.

Unfortunately, the sand seems to be capricious ground at best, and another wave of banking losses have been predicted, with reports of anything around the $40 to $50 billion level being the amount that European banks are exposed to. Then again what’s this piddly amount between friends after the recent figures we have seen bandied around?

The question being bandied around is not so much will this issue on its own be enough to cause another sharp financial issue, these losses should be nothing more than a “sideshow” as Stephanie Flanders’ blog describes this far more eloquently than I can here, but really if this is just an example that there are still various other bad news scenarios still to come out that could cause a double dip.

There are some who believe that the gradual recovery we have seen, or believe we have been seeing, is nothing more than a mirage and that more chickens will come home to roost in the second half of 2010.

Some even talk not of U, V or W shaped recession but a double stair, a sharp drop – a period of calm – then another sharp drop. It is true that there is still much to be concerned about, for example will the UK itself be downgraded from its’ AAA rating? If so, though I still believe this will not happen, there could be some nasty side effects.

Also, although unemployment is not quite as bad as predicted, there are no new jobs being created. So whilst some can live on savings and redundancy cheques for while, especially when mortgage rates are low, this cannot go on indefinitely. When rates do start to increase, if lenders have not relaxed criteria to allow those who cannot move the protection of fixed rates then they are storing up some serious issues.

We also have to wean the financial system off the aid it has received and start to pay it back, so any new Government may not be able to avoid a hard period of tax rises amongst other things.

It’s not about painting a depressing picture, but it is important to be realistic.

In the meantime the positive signs of a recovery in mortgage lending still abound. Reportedly more and more applications are in the system for institutions to become banks and lenders, whilst Paragon and Kensington’s’ tentative return to the lending party is welcome.

Mortgage products are increasing all the time, with competition set to increase again next year, and a general election could produce a customary “feel good” factor, as could a decent World Cup run! Two years of issues is a long time, and the growing public hunger for good news could produce the sentiment required for a sustainable, if slow, recovery.

For businesses, especially in our market, the first few months of 2010 will be key to establish a solid core base to take advantage of the early opportunities and ride out future bumps. There is a fine line between being optimistic and just plain naive.

The clever, adaptable companies will continue to weather the storm and be there to reap the rich rewards that will eventually come.

They are going to investigate in-particular, “the sharp rise in repossessions and the chronic shortage of affordable home loans for first-time buyers”.

Brilliant. Is that really the best that the Government can come up with? A cross-party committee of MP’s wagging fingers at bankers and telling everyone what they are doing wrong whilst they try to keep their latest expenses form under wraps!

More worryingly, the question that really should be asked is do they really still not understand what is going on and what the real issues are?

As far as repossessions are concerned, yesterday we saw the Fitch report which suggested that 15% of prime home loans were in negative equity. As someone who took out a 90% remortgage at the height of the market you can add me into that stat! To be honest it was actually a calculated move as I believed if I did not release the equity then I would not be able to for a while!

Anyway, where was I? Oh yes, while on first glance the Fitch report makes grim reading for many homeowners across the country, the key is not to panic. Yet.

Firstly, the current negative equity predicament is not the unmitigated disaster it could have been if interest rates were still at 2008 levels. Also, negative equity is only a problem if you have to move or remortgage, and for many homeowners they are not in this position and can hopefully ride out the storm and wait for prices to rise again.

The blow of falling prices has been lessened by many people also seeing their mortgage payments fall dramatically in the last nine months. Homeowners can still take advantage of low rates and try and pay off a large chunk of their mortgage while payments are so affordable.

For example, if you have an interest only mortgage, you should look, if you can, into converting to a repayment mortgage in the short-term, making sure that your lender will let you switch back to an interest only mortgage if rates start to rise quickly. This means any negative equity positions won’t be as pronounced if capital is being paid off.

The real issue will come in a few months time, when rates rise again, before house prices have had a chance to pick up dramatically. That is when I expect to see the repossession figures rise again, and all those people who did not fix in when they had the chance begin to kick themselves.