However, for those operating on 2 per cent margins at SVR, Halifax has already premeditated the stance that it did not need any further margin and passed on the base-rate cut in full almost immediately after the MPC made its announcement. This surprised a number of its competitors which have since reconsider their position.Most of the big-name lenders in the market operating on 2 per cent margins have sustained this position and passed on the base-rate cut. Those operating on tighter margins on SVR, notably Nationwide, have not passed on the cut fully. You would expect to see this narrowing of competitive position as base rates decrease but from an intermediary’s perspective it does nothing more than emphasise the need to utilise base-rate-based products. Although surveys suggest that 50 per cent of borrowers remain on lenders’ SVRs, most intermediaries disagree with this. As a result of intense remortgaging and enhanced retention activity by lenders over the last few years, the figure is closer to 30 per cent. The lenders’ ability to manage their margin on a month-to-month basis on only 30 per cent of their book exacerbates the importance of SVR-based loans. The majority of new business and retention business is being written on fixed margins, with either fixed rates or base-rate trackers. This places extra leverage on the importance of moves in the SVR to lenders which may account for some lenders delaying their rate changes. Discounted products are starting to appeal to consumers more. Any lender which is concerned about its margin management capability, in view of potential decreases in base rate, should put their product emphasis on discounted SVR rather than base-rate products. With the possibility of a further base-rate cut and a suspicion that, if this were to occur, lenders would not pass the rate cut on in full, an SVR discounted product, which beats a discounted base rate, may not be as attractive as it seems. If we continue to put new customers into base-rate-based products, the volume of SVR-based lending will decline, making lenders even more reluctant to reflect base-rate decreases in full.
IFA Promotion is complaining that it is shouldering work it believes the FSA should be doing.
I refer to Terence O’Halloran’s letter attacking Dianne Hayter (MM, 18 August). I would be interested to know his reasons for concluding that consumers would be better off without representation by a consumer panel. He mentions the disappearance of defined-benefit pension schemes. How does he think that relates to consumer representation, particularly when most consumer […]
Norwich & Peterborough Building Society
The ABI has called for a rethink on stakeholder pensions after disappointing sales in the second quarter of the years despite the raising of the charge cap to 1.5 per cent. The product attracted sales of just 92m on an APE basis, leading the ABI to call for a simplification of the basic advice regime […]
Trapped between expectations for near double-digit returns and strong apprehensions about investing in persistently volatile markets, investors worldwide are of the opinion that professional financial advice is worth the fee. But even though they believe individuals who work with a financial professional are more likely to achieve their goals, investors have a clear vision of […]
News and expert analysis straight to your inboxSign up
Latest from Money Marketing
Almost a third of women in the asset management industry have experienced sexual harassment in the workplace, according to a new survey, as Fidelity and the Worldwide Healthcare Trust dismiss fund managers due to inappropriate behaviour. A global survey by the Financial Times reveals 32 per cent of women working in asset management have experienced […]
Platforms are chasing assets in order to achieve scale but the winners of the future will need more than that The importance of scale is one of the key topics of conversation in the platform industry. Scale brings some clear benefits to platforms, such as allowing them to charge consumers less, providing the means of […]
The pensions industry has welcomed government reforms to boost auto-enrolment while raising concerns about their limited scope and time it will take to implement them. In its much anticipated review into auto-enrolment the government says it will lower the age at which people are eligible for a workplace pension from 22 to 18. The government […]