Edeus, Kensington and GMAC-RFC have all confirmed they will indeed – or have already – re-priced their products. All three lenders previously dismissed questions on whether they were concerned about the impact of the US sub-prime crisis on the UK mortgage market but have clearly changed their mind what with the worsening situation which saw the FTSE close some 250 points down yesterday.
The start of the week saw Mortgages plc announce that they will be increasing their fixed-rates by a minimum of 0.75 per cent, with some higher-risk loans up by more than 1 per cent, with effect from August 21.
Victoria Mortgages, which withdrew from the sub-prime market earlier this month, has become the first lender to increase its rates by as much as 2.5 per cent for its sub-prime range and 1.25 per cent for its near prime range.
Edeus has confirmed it will be increasing its sub-prime range by 0.35 per cent whilst Kensington says it will increase rates by 0.55 per cent. Both lenders say they have not changed any of their criteria, the changes only include a rate increase.
Lenders such as Victoria and MPLC could be seen to have effectively priced themselves out of the market with such high rate increases. One imagines that they’d rather take this route than get the bad PR of being seen to withdraw completely from the market for however many months they might have needed in order to avoid taking on any further risk on their already de-valued books.
Meanwhile DB Mortgages has decided to tighten up its lending criteria by withdrawing the self-cert option and no longer accepting first-time buyers on its sub-prime mortgages from August 20.
The lender says that second charges will no longer be accepted and it will no longer consider those who have missed payments in the last three months for all sub-prime schemes.
But it’s not just the sub-prime lenders that are being hit with the effects of the US sub-prime downturn. It’s been well documented in the media this week that the UK’s third biggest lender Northern Rock has found itself on hard times.
The lender has halved in value since this year’s high, with shared down 28 ½p to 659p yesterday. Alliance & Leicester dropped 40p to 1001p, while HBOS fell 37 1/2p to 849p.
With Northern Rock being one of the UK’s biggest lenders, you would imagine that if the situation got drastically worse for the firm the Bank of England would surely be called upon to follow moves by the European Central Bank, the US Federal Reserve and other government lenders of pumping money into the markets.
With the markets changing day by day and even hour by hour, it really is a case of watch this space. One thing for sure, those brokers that have gone away sunnying themselves on holiday for the month of August are going to get a big shock when they get back home to find a substantially different-looking marketplace to the one they left behind.