It's all down to swap rates and LIBOR, not the BoE

That’s why rates have been going up. Looking at what lenders have been doing over the past 6 months is completely the opposite from the BoE rate cuts. Even though they have reduced the base rate, lenders haven’t been passing it on. What they do however, is hike up the rate by 0.25% the day before the base rate decision, wait for the cut, and reduce it by 0.20 – 0.25%, thus making whacking great margins.

And it’s not just 100% and sub prime mortgages that have been withdrawn from the market. 95% loan-to-value mortgages have been reduced to 85-90%, 75% mortgages (generally considered ‘safe’) have been hiked up to 90% prices….

In a nutshell, lenders simply don’t know what to do. They are scared of being too competitive (as they don’t have the funds to fund the demand), and they are scared of being too cautious (so they get enough funding for X amount of deals, then withdraw the product immediately). I can only hope that the lack of supply and huge demand that has long been synonymous with the UK continues.

But yes you’re right r.e insurance cover. Unemployment levels will undoubtedly increase the longer this whole credit crunch continues. In my line of work no one wants to advertise in the magazine or the web, and a frequent excuse is “look, we don’t have the money to, and even if we did we don’t want the business anyway!”

Happy days!

Posted By: Stoopish on April 1st 2008 at 09:57:49

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