by Mark Johnston
Barclays has recently dropped its rates by 0.32 per cent on its Woolich tracker and fixed rate mortgage deals. Two other mortgage lenders, in an effort to entice homebuyers through the door, have dropped their interest rates too.
Two years ago Skipton Building Society left the buy to let mortgage market but now, they are back. Building societies have been fighting hard over the last few years, backed onto the ropes by their small size against more capitally rich larger lenders but they are all making a bit of a comeback.
Yorkshire Building Society has something of a reputation when it comes to taking over it’s smaller rivals. Last year, Chelsea was absorbed into the group in a high profile take over that lead to the Yorkshire taking on their exposure of £41 million worth of mortgage fraud within its risky buy to let sector.
2008 saw the Yorkshire take in the Barnsley Building Society after she failed under the losses associated with the collapse of some Icelandic banks and their faulted deposits.
The latest possible merger on the cards for the Yorkshire is set to take on Norwich and Peterborough but this too comes with some risk. N&P has put aside an awesome figure of £57 million to cover compensation claims by circa 3,200 customers who invested in the now failed Keydata Investment Services Ltd. This compensation aside, Norwich and Peterborough have reported a pre tax loss of £48.9 million for 2010. Taking account of this potential loss, the Norwich and Peterborough building society would have £5.1 million in pre tax profits, a better result than the year before when they posted pre tax profits of £1.3 million. This shows that the company was actually doing well before the disaster at Keydata.
Other reasons that Norwich and Peterborough have sought a merger include “higher long-term funding and liquidity costs, and a competitive and regulatory bias to size”. Something else the other 48 building societies may take into consideration too.
There are clearly dark days ahead for smaller lenders and building societies and mergers may be one way to deal with these challenges. That said there is significant strength and competitiveness in the market with a few societies reporting stronger than expected financial results.
Skipton have recently released a range of two and three year mortgage rates in the fixed term bracket. These deals are only available for investors who have at least a 40 per cent deposit available but these deals do represent a move by this lender back into the buy to let market.
Only available through selected mortgage brokers, these new Skipton mortgages offer a two year fixed rate of 4.49 per cent, for 60 per cent loan to value and a three year fixed rate at 5.49 per cent at the same loan to value. There are fees applicable of up to £245 and a completion fee of up to £1,250.
Head of products at Skipton Building Society, Kris Brewster said, “We have decided to offer a set of straightforward and competitive products which we hope will appeal to both existing landlords and new ones hoping to make the most of the investment opportunity this sector represents,”
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