Great news for borrowers: the mortgage market is in the midst of a perfect storm. Deals are positively raining down.
So says Moneyfacts, the financial researcher, which points out that there are more than 2,400 remortgage products on the market, virtually every one of which will offer better terms than lenders’ standard variable rates.
Under the surface of this, however, may lie an injustice which is deserving of more attention. The problem with re-mortgaging is that it isn’t as simple as it used to be. If a borrower wants to take advantage of one of the bewildering array of new products that are on offer they’ll first have to pass one of the affordability tests that are making life so difficult for first-time buyers. In other words, they’ll have to prove they can afford a cheaper deal than the one they’re already on to the satisfaction of the Bank of England.
That’s fine for people who are in full-time employment on the same or better salary and with orderly finances who weren’t stretched when they took out their original loans.
But what about those not in that happy situation? This could include people who swapped their old jobs for self-employment or running their own business. For these people, remortgaging can get very complicated, even if they are actually better off than they were when they took out their first loans.
People like this may well find themselves stuck with Standard Variable Rates (SVRs) averaging 4.82 per cent, looking on in envy at Moneyfacts figures showing they could save as much as £2000 a year on a £150,0000 loan if only they were allowed to access one of the fancy new deals.
The SVR is like the teaser rates used to tempt savers into moving their deposits, or the favourable terms offered on balance transfers by credit card companies. They are there to draw in business, with the hope that the business will stick once it is in and the terms deteriorate.
Often it does. While “rate tarts” might move their money in response to best buy tables, even if that means filling in a 50-page form, most people find things like their jobs and their families get in the way. Those willing to do the work required to move their money around will make more of it than those that don’t.
But what about those who can’t make that choice thanks to the new regulations?
I’m not going to argue against the principle of affordability tests, particularly given the cavalier way banks behaved in the past. It was asking for trouble to allow the likes of the late Northern Rock to offer 150 per cent loans (or whatever the grotesque Together product was offering). Some sanity was long overdue.
But having introduced affordability tests, the Bank of England, or the Financial Conduct Authority, might like to consider their unintended consequences and whether the high level at which lenders set SVRs is entirely fair.
After suitor Zurich’s sweet words, RSA will be hurting
The sun, it seems, has stopped shining on Royal & Sun Alliance. With a deadline to table a formal offer fast approaching, Zurich Insurance decided it had better uses for the £5.6bn in cash it was proposing to pay.
Such as fixing a general insurance business that might be as full of holes as RSA’s was 18 months ago, before the former RBS boss Stephen Hester grabbed it by the scruff of the neck.
To be fair, there were doubts about this deal getting done even had everything turned out to be rosy in Zurich’s garden.
The latter had made some pretty big promises to justify the price tag in terms of the costs it claimed it could take out and the revenue synergies it could generate.
“It’s not you, it’s me,” is what RSA said it had been told when its suitor ended the affair, a line heard by too many jilted lovers. “They looked at my books and I still looked pretty. I’ll show them. I will survive.”
But can RSA thrive? That’s the challenge now. The parting wasn’t sweet sorrow for investors who watched as £1bn was wiped from their company’s market value. They’ll be hungry to get it back.
Unfortunately, it’s hard to see where a rival bid might come from, even with the sector in the midst of a deal frenzy. Worse still are the suggestions that Mr Hester, who has been credited with making RSA look pretty(ish) again, would be a perfect fit at the helm of Barclays.
French have Treasury over a barrel of nuclear fuel
State ownership is anathema to the current Government, but it’s happy to deal with companies owned by other states – specifically those in France and China, which it would like to team up and produce a new generation of nuclear power plants for us, starting at Hinkley Point.
The problem is, the French are playing hardball.
Angling for some coverage of the Chancellor’s trip to China, the Treasury has announced a £2bn loan guarantee in the hope that it will fuel the sputtering project, led by the French state-owned EDF.
Sacre Bleu! So the French will say now oui? Non? Peut-être? Having already admitted that the controversial project’s completion date will be delayed, EDF is in no hurry to start the reactor.
It knows it can afford to sit on its hands and see if it there aren’t any more sweeteners to be had.
