The Good and the Bad

by Mark Johnston

With all the new regulations, new lending limits, new rules and guidance, new lenders and with a general increase in austerity it is no wonder that some borrowers are either becoming confused or overwhelmed.  There seems to be an increasing large sector of borrowers that seem so overwhelmed that they appear to be taking out very expensive mortgages for no apparent reason.

The European mortgage market is undergoing a regulatory overhaul and there is a distinct impression amongst industry experts that these reforms may very well conflict with the UK mortgage market changes. 

The Council of Mortgage Lenders (CML) has suggested that pursuing three separate regulatory initiatives in parallel may very well lead to potential conflicts.  The Financial Stability Board (FSB), European Commission (EC) and the Financial Services Authority (FSA) are all in the ring attempting to promote a cross boarder mortgage market.  The CML has said that they will support the principles of the FSB and the EC but it is open in its belief that the EC should not have much influence in cross boarder markets in the mortgage arena. 

A spokesperson for the CML advised that “Consumer expectations and demands for familiar types of credit, national systems of property valuation and registration, and differences in funding markets and mechanisms will not be addressed by the EC proposals.”  Going further and saying that “It is highly unlikely that a single market will emerge from the European initiative.”

With the published recommendations of the Independent Commission on Banking, it is clear that there is serious banking reform on the horizon which will inevitably lead to a significant amount of change for the mortgage market.  The price of capital for the banks will be driven up by the potential to include other assets in the proposals, which could prompt business leaders to sell off whole business lines.  These other assets include mortgages, personal loans, credit cards and wealth operations.  This proposal may very well see the number of lenders in the mortgage market increase and competition increase, potentially leading to better mortgage rated and offers.  A further question posed on this ring fencing proposal is how “hard” the fence should be and whether there is a possibility for cross over financing of other business units.

I’ve detailed some of the more expensive mortgages below, watch out for these.

BM Solutions Mainstream five year fixed rate of 7.4 per cent with an arrangement fee of £1000.  Lloyds, the banking group desperate to make money and attract customers back, is offering a 6.8 per cent two year fixed rate deal also with a grand in arrangement fees.  Staggeringly some borrowers are taking these deals up.  On the 15th of May I wrote and reviewed some of the better deals out there, so if your looking at the deals above, stop and read my article from the other day titled Mortgage Deals Reviewed.

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