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Bland Unsight

Skipton Raises Rate On 5 Year Fix

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H/T to hpcwatcher who posted a link to the same story in the Financial Times. Fortunately the priceless quote that I wanted to preserve for posterity is also in the Mortgage Solutions piece on the same story, so I'll link to that - Skipton hikes fixed rates to ease 'unprecedented' demand.

The quote is from their Head of Intermediary Sales, (which I guess it the employee charged with taking care of the lending that comes in via mortgage brokers), a certain Paul Darwin.

We do not believe that it is appropriate to compromise service to existing pipeline customers by continuing to take on the current unprecedented high volumes of new business that we are experiencing.

"As a responsible and transparent business, we're making this move to ensure our customers and broker partners going through the process of securing a Skipton mortgage remain our priority. It's simply the right thing to do."

I've taken the impression, perhaps incorrectly, that the way that mortgage lending works is that the bank or building society will target a certain amount of lending against a given 'deal'. It seems to me almost certain that as the FLS money is now over for non-BTL residential mortgages their talk of service and pipelines is nonsense. I assume that they've got a certain amount of funding lined up, very possibly some of it FLS facilitated. On the basis of this a certain fixed maximum of amount of lending at these rates can be done. Hence they know that they've £ x million to lend at whatever it was, somewhere between 2.5% and 3.5%. However, now that the product is in the marketplace, they see the volume of applications and it's massive. Hence they are confident that they are easily going to shift all the FLS facilitated cheap money that they've drawn down at the cheap rate so they are now going to see if they can still shift it at a higher rate and bung on 0.71%.

Gilts are certainly steady and if anything they are tracking slowly down away from the 3% highs in yield of the summer. Certainly ISA rates remains on their *rse. Taken together this would suggest that this lending is getting cheaper to fund and thus the 'demand' means that they are being able to make the loans at even higher rates than they envisaged. That must be doing wonders for their spreads!

The bank recapitalisation through profitable lending part of FLS appears to be working very nicely. Shame about the need to bypass any kind of democratic conversation about a plan that involves ripping the faces of retail savers so that pwoperdee mad jokers can refinance cheaply, or just bid up prices further, and so that more of our incomes can be tapped for supporting our crap banks. Same old same old. Just thought this was a particularly obvious case. Shocking that the FT don't bother to scratch beneath the surface of the story. All they appear to have done is regurgitate the flummery of the Chief Skipton Debt Pimp to the Ghastly Mortgage Brokers, sorry, Skipton's Head of Intermediary Sales.

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H/T to hpcwatcher who posted a link to the same story in the Financial Times. Fortunately the priceless quote that I wanted to preserve for posterity is also in the Mortgage Solutions piece on the same story, so I'll link to that - Skipton hikes fixed rates to ease 'unprecedented' demand.

The quote is from their Head of Intermediary Sales, (which I guess it the employee charged with taking care of the lending that comes in via mortgage brokers), a certain Paul Darwin.

I've taken the impression, perhaps incorrectly, that the way that mortgage lending works is that the bank or building society will target a certain amount of lending against a given 'deal'. It seems to me almost certain that as the FLS money is now over for non-BTL residential mortgages their talk of service and pipelines is nonsense. I assume that they've got a certain amount of funding lined up, very possibly some of it FLS facilitated. On the basis of this a certain fixed maximum of amount of lending at these rates can be done. Hence they know that they've £ x million to lend at whatever it was, somewhere between 2.5% and 3.5%. However, now that the product is in the marketplace, they see the volume of applications and it's massive. Hence they are confident that they are easily going to shift all the FLS facilitated cheap money that they've drawn down at the cheap rate so they are now going to see if they can still shift it at a higher rate and bung on 0.71%.

Gilts are certainly steady and if anything they are tracking slowly down away from the 3% highs in yield of the summer. Certainly ISA rates remains on their *rse. Taken together this would suggest that this lending is getting cheaper to fund and thus the 'demand' means that they are being able to make the loans at even higher rates than they envisaged. That must be doing wonders for their spreads!

The bank recapitalisation through profitable lending part of FLS appears to be working very nicely. Shame about the need to bypass any kind of democratic conversation about a plan that involves ripping the faces of retail savers so that pwoperdee mad jokers can refinance cheaply, or just bid up prices further, and so that more of our incomes can be tapped for supporting our crap banks. Same old same old. Just thought this was a particularly obvious case. Shocking that the FT don't bother to scratch beneath the surface of the story. All they appear to have done is regurgitate the flummery of the Chief Skipton Debt Pimp to the Ghastly Mortgage Brokers, sorry, Skipton's Head of Intermediary Sales.

Why are UK fixed-rate mortgage rates rising? Well this time last year the 5 year Gilt yield was less than 1% now it is 2%

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The bank recapitalisation through profitable lending part of FLS appears to be working very nicely. Shame about the need to bypass any kind of democratic conversation about a plan that involves ripping the faces of retail savers so that pwoperdee mad jokers can refinance cheaply, or just bid up prices further, and so that more of our incomes can be tapped for supporting our crap banks. Same old same old. Just thought this was a particularly obvious case. Shocking that the FT don't bother to scratch beneath the surface of the story. All they appear to have done is regurgitate the flummery of the Chief Skipton Debt Pimp to the Ghastly Mortgage Brokers, sorry, Skipton's Head of Intermediary Sales.

It's not earning anything in the bank. (Yet 0% is better than losing 50%). Let them service the demand. Unlike others I don't polish the shoes of people buying with excuses about population growth, too few houses, BTL is the new savings account... nor offer them excuses.

They're going to run out of buyers.... and it's a long way down to where the bulk of younger buyers will go for a mortgage.

70% HPC. When this market goes, I'm going to watch older owners cry and beg me to buy their house. :)

The supply, mass volume of new loans from a cascade of sellers, and BoE gets the credit growth it's been looking for.

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Why are UK fixed-rate mortgage rates rising? Well this time last year the 5 year Gilt yield was less than 1% now it is 2%

If you put things in a massive oversize font, does it make them more true?

The 2 yr gilt yield has been rising since July 2012, when FLS came in, but the 2 year fixes have been falling over the same period, all the way to today. The 5 year yield curve turned the corner at the same time, in July 2012, but over the same period to today the 75% LTV fix has been falling see Chart 2.6 in the April 2014 Trends in Lending.

If you don't think this FLS effect on mortgage rates is real, then will you believe it when a bank announces it on its website

Interest rate reduced by up to 1% as part of the Bank of Scotland Funding for Lending Scheme.

Source: Bank of Scotland - Buy to Let mortgage

If Mr Richards suggestion was explanatory it would work in the past, wouldn't it? Unless he'd missed something blindingly obvious...

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Was real.

Not..is real.

The sham is over...i guess they think there followed by htb would get them to the next election in boom times...little did they realise no one wanted this boom...no one can afford it and no one believes it.is a vote loser and the first big party that stops immigration ...hammers the bankers and pulls hack from Europe will win by a land slide.

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If you put things in a massive oversize font, does it make them more true?

The 2 yr gilt yield has been rising since July 2012, when FLS came in, but the 2 year fixes have been falling over the same period, all the way to today. The 5 year yield curve turned the corner at the same time, in July 2012, but over the same period to today the 75% LTV fix has been falling see Chart 2.6 in the April 2014 Trends in Lending.

If you don't think this FLS effect on mortgage rates is real, then will you believe it when a bank announces it on its website

Source: Bank of Scotland - Buy to Let mortgage

If Mr Richards suggestion was explanatory it would work in the past, wouldn't it? Unless he'd missed something blindingly obvious...

Don't shoot the messenger!

Shaun Richards seems to have some good analysis on his site. I'm just reposting that because it seemed relevant to the Skipton press release.

I have no idea how to embed tweets in this forum. I just cut and pasted and that's how it turned out!

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Surely the obvious explanation for the recent pullback in gilt and US treasury yields is a flight to safety in view of what's been unfolding in Europe, Russia and China? The Russian bond market, for instance, has all-but frozen up. Even 9% on the 10yr has been insufficient to motivate investors. On April 23rd an auction for $20m in Russian bonds failed, the second failure in 8 weeks. And then there's Draghi's pillow talk of a rate cut + QE pump that's also making everyone jumpy.

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i had a somes savings accounts with skipton a few years ago.

i gave up with them as the rates are so low. can get better rates on current accounts

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Don't shoot the messenger!

Shaun Richards seems to have some good analysis on his site. I'm just reposting that because it seemed relevant to the Skipton press release.

I have no idea how to embed tweets in this forum. I just cut and pasted and that's how it turned out!

Shoot first, ask questions later! ;)

Fair enough - but surely not unreasonable of me to assume that you gave some credence to it, given that you reposted it without any caveat.

It seems very reasonable to suggest that future expectations regarding interest rates will feed into mortgage pricing - but a year later?

2+year+fixes+-+what+next.png

The Bank of England quote is saying, as best I understand it, "We phoned round in March 2012 and asked the banks and building societies why their fixed rate lending was getting pricier and they said that it was getting pricier for them to borrow the money they needed to fund the lending". Now the gilt yields continued to rise, but the fixed rates didn't - if it was as simple as Sean Richards suggests that would not have happened - but it did. You can check the behaviour of the 2 year gilt on Bloomberg for free.

What did happen in Q3 2012? Funding for Lending.

I don't disagree with Richards's suggestion that movements in short term rates will push the mortgage rates on 2-year and 5-year fixes, if that was the only game in town - it is clearly now happening as the effect of FLS wanes and the effect of rising short term rates informs expectations. However, I definitely do not believe that the person charged with announcing a change in Skipton's stance on future rates feeding into the rates they offer will be the Head of Intermediary Sales, and I certainly don't see every bank hiking rates on 5-year fixes by 0.71% on an existing product. Duke's mortgagemeter historical graphs certainly don't look like that.

When and by how far banks and building societies move their rates to reflect expectations of future market rates is a whole different thread to this one! This is just highlighting some naked profiteering which is being 'sold' as top notch customer service.

Edited by ex nihilo de novo

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Surely the obvious explanation for the recent pullback in gilt and US treasury yields is a flight to safety in view of what's been unfolding in Europe, Russia and China? The Russian bond market, for instance, has all-but frozen up. Even 9% on the 10yr has been insufficient to motivate investors. On April 23rd an auction for $20m in Russian bonds failed, the second failure in 8 weeks. And then there's Draghi's pillow talk of a rate cut + QE pump that's also making everyone jumpy.

1. Taper caper overdone

2. Secular stagnation story - there IS no inflation. Market is starting to cotton on.

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1. Taper caper overdone

2. Secular stagnation story - there IS no inflation. Market is starting to cotton on.

You're right, there is no wage inflation .

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