It's rare that a new financial product makes me sit up and take notice, but it happened the other day. It's even rarer that the eye-catching product is a mortgage – after all, we have seen the number of home loans fall by more than 80 per cent since the onset of the credit crunch.
HSBC – one of the banks which has seen its market position strengthen during the crunch – is to launch its new "split-loan" mortgage. It works like this; the borrower can fix a proportion of their mortgage, while the rest of the loan remains variable, tracking the Bank of England base rate for the life of the loan. Either 25, 50 or 75 per cent of the loan value can be fixed, the rest tracks the BoE rate. The fact that it tracks the bank rate is appealing, as many providers (without the credit rating or deep pockets of HSBC) have been widening their spreads on trackers – in other words, charging well above base rate. What's more, the mortgage fee is just under a grand, which in these days of inflated charges is not too shabby. Borrow at a loan-to-value of 70 per cent and you pay lower rates than at 80 per cent, but the difference between the two is reasonable.
The idea of a split loan is to attract all those people who want the surety of fixed rates but are pretty certain that bank rates will rise in the not-too-distant future, yet they can't quite bring themselves to go for a fixed rate which will sit comfortably above base rate.
Personally, I'm firmly in favour of long-term fixes in this climate; the terrible fiscal situation and inflation above target both point to significantly higher rates in a few years' time. However, if you'd said three years ago that interest rates would be at 0.5 per cent today, then you'd have been viewed as a bit of a basket case, so calling rates is notoriously difficult.
The fact that I couldn't find a mortgage broker willing to say anything negative about the HSBC mortgage was telling. You see, brokers hate HSBC because it only sells directly to the public, so any chance to give the giant bank a kicking is usually gratefully received.
HSBC could be on to a winner. Let's hope it gets the admin sorted and makes this mortgage available to people with smaller deposits.
This isn't the election to win
This past week I have been reminded of Harold Macmillan's famous phrase about what was most likely to blow his government off course – "events dear boy, events".
A fortnight ago I wrote here disparagingly about Lib Dem leader Nick Clegg battling bravely to raise his party's share of the vote from 19 to 20 per cent. A couple of debates later and Clegg's popularity has gone stellar and we are now the closest to a three-party state than at any time since the 1920s. Electorally, this is supposed to be the worst news for the Tories but, really, is this an election they want to win?
The manifestos of the three parties have no answer for how we are going to close the deficit, just mere hints. This probably relates back to when George Osborne, the Tory shadow Chancellor, mentioned the dreaded word "cuts" at the last party conference and saw the poll ratings slide. But without the legitimacy of actually going to the voters with a programme for solving the deficit, public-sector cuts and substantial tax rises – I can't see any winner of the election, whether it be Tory, Labour or Lib-Lab, being able to take the brutal decisions (on a scale close to Ireland and Greece) that may have to be made. As a country, we are doing the personal-debt equivalent of hiding the bills behind the clock on the mantlepiece – but they will have to be paid.
All I can see, post-election, is a drift into deficit crisis, the Government being discredited (Think Black Wednesday) and another poll, which will be the one to win. And by that time, the public will be a little better prepared for the bad news of cuts and tax hikes.
The very sad news has reached me of the death of David Elms, the former chief executive of IFA Promotion, at a tragically young age after a battle with pancreatic cancer. I first met David the best part of a decade ago. He was a massively impressive figure and during our regular lunches he'd generate ideas 10 to the dozen, while always valuing and actively seeking out the opinions of those around him.
David was utterly dedicated to the ideal that sound, unbiased financial advice should be available to all, and he worked tirelessly on the side of the consumer. Above and beyond this, though, David was a delightful man to deal with – passionate, intelligent, humane, and always thoroughly entertaining company. And he stood up to his final illness with great bravery.
My thoughts go to his partner Helen. David's passing is a great sadness. I will miss him.Reuse content