Press
Banks are grabbing margins while they can
James Carter
MortgageAdviser
Published Wednesday , March 12, 2008
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Adviser says
A year is a long time in the mortgage market. We were previously chasing two-year trackers significantly below the base rate, now it is a case of finding clients the lowest margin over base without a massive fee and at 75 per cent LTV.
With margins significantly squeezed as the battle for market share has intensified in recent years, lenders are now looking to reclaim some of their profit over the term of the deal rather than the medium to long-term.
The main issue is the client's monthly affordability. Banks obviously feel that borrowers will have increased affordability when this happens, so they are snatching the margin now while they can. In a sense, they are using the apparent predictability of interest rates to leverage increased profits on previously unattractive rates, who would have taken base rate plus 0.69 per cent this time last year?
It is now questionable as to the attractiveness of tracker rates or fixed rates. Clients have long missed the best tracker deals. It would be churlish for clients to base their borrowing decisions on affordability being stretched now but improved when rates fall. Those clients with tight affordability and a cautious attitude to risk must opt for fixed rates.
James W. Carter is an IFA