Are you a business wanting to reduce your customer base?

Take a tip from Bank-Of-Ireland-owned Bristol & West... give them a "goodbye kiss" in the form of a financial incentive to leave!

Admittedly, "too many customers" is an odd conundrum that won't apply to many businesses.  It takes being a lender in a credit crunch to arrive at a situation like this. Bristol & West simply has too many loans on its book, all of which need to be properly balanced against capital (at least, that's the case now that a modicum of sense has returned to banking).

So in order to persuade 1,400 borrowers to take their loans elsewhere, BoI has offered to waive Early Repayment Charges of up to £5,000 on fixed-rate mortgages that are due to expire over a year's time.

It has also asked broker London and Country to assist these customers by taking them through their options!

Generosity or pure pragmatism? 

Undoubtedly this move is sensible and probably not that costly to Bristol & West.  It helps parent company Bank of Ireland avoid thorny funding problems, and it wouldn't have expected to collect those fees anyway.  However, it will lose out on the interest on those deals, which would have been up to 5 per cent above the base rate.

Some borrowers will be delighted to get the chance to switch without penalty at a time of remarkably low rates.  Just one caveat, though: that assumes that new lenders will value their homes at least ten per cent, preferably twenty per cent higher than their loans.  Otherwise this golden opportunity might have to pass.

And if you're convinced this is a generous move from Bank of Ireland, compare this move with GMAC-RFC's £25,000 farewell gesture to some of its customers trapped on awful mortgages a year ago!

There's no clear moral of the story for borrowers, but for lenders it's obviously been bad news to take on more customers than their parent operations can comfortable support. 

Buyers, not remortgagers, will benefit from HSBC's increased lending quota

HSBC has responded to growing demand from first-time buyers, announcing an increase in the amount of money it is earmarking for purchase loans at the 90% loan to value limit.

The bank's £500 million increase in allocated lending should enable around 3,650 additional house purchases between now and the New Year (based on an average first-time purchase price of £150,289).

HSBC Head of Mortgages, Martijn van der Heijden, comments that many buyers who put off purchasing last year are now heading back to the housing market as they have seen reports of prices bottoming out.

If you want a fixed-rate 90 per cent mortgage, HSBC's rates work out as follows:

• 5.99 per cent fixed for 2 years
• 6.49 per cent fixed for 5 years
• Both these deals cost £599 in fees.

Competing deals are available from NatWest (5 years at 5.99 per cent, with no fees) and Yorkshire Bank (2 years at 5.99 per cent, with a £999 fee).

HSBC is also offering 90 per cent LTV mortgages with tracker interest rates. You can opt for a 2-year discounted tracker (3.89%, booking fee £1199) or a lifetime tracker (4.09 per cent, booking fee £999).

The surprise is that competition for lending at this level is still so low.  However, with the cost of inter-bank lending having dropped from its credit-crunch high to a historically low rate, we might see more lenders boarding the 90% LTV bandwagon.

Housing repossessions could be staved off more easily if Labour's latest plans are anything to go by.

John Healey, the Housing Minister, announced to the Labour Party conference an intention to introduce new rules aimed at protecting homeowners struggling with their mortgage repayments.

Under the plan lenders will have to tell local councils when they file forrepossession action in the courts. The idea is that councils will then intervene to offer advice orhelp with special rescue schemes.

We don't know what the rescue schemes are yet, nor were any figures given on how many repossessions this plan seeks to prevent.  In these cases, only last-mnute action is prvided, whereas we feel that there's plenty that could be done before things get to repossession.  How about notifying the councils sooner - for example, as soon as a default is recorded?

Nevertheless, with over 100,000 possession orders made last year, it's good that moves are being made to offer assistance in these cases.

Leeds Building Society is launching a cheap tracker mortgage at 3.2%...

– or you can pay 3.7% on a similar deal with no lock-in.

There are two new tracker mortgages on offer and one fixed-rate deal. The lowest initial interest rate is available on the two-year mortgage tracking at 2.7% over Base Rate. It's limited at 75% loan to value, with total fees of £599.  This mortgage allows you to repay up to 10% of the capital each year without penalty.

Oddly, the higher rate deal (currently 3.7%, tracking at 3.2% over base rate) has lower loan to value limits (70%) and higher fees (£999). Why's that?

The difference is that the latter deal can be paid off at any time without penalty.  If you suspect you might want to clear large chunks of the capital at once, this deal could be better over the term.

Continuing the 'no handcuffs' theme, Leeds also introduces a two-year 4.6% fixed rate mortgage that lets you repay unlimited capital at any time without penalty. Total fees are £999 and the loan to value limit is 70%.

Reallywannatracker? 

I don't really understand the strength of demand for trackers at a time when the Bank of England is unlikely to make any further cuts in its rate.  However, if you're betting on base rates staying under 1.5% for the next couple of years, the interest would cost you less with the tracker than with the fixed—so that's a bet you might be happy to take.

And if freedom's your thing, Leeds Building Society clearly has a thing for non-locked-in mortgages, so they'd certainly be worth a look.

Discounted variable rate deals get extra competition

Clydesdale Bank and Yorkshire Bank (separate trade names, but same operation) are releasing discounted variable rate mortgages that start as low as 2.99%, provided you have a 40% deposit or equity share.

The 2.99 % figure is a discount of 1.60% from the banks' Standard Variable Rates. If your deposit isn't that juicy (and most of ours aren't), you'd have to settle for starting on 3.49% (up to 75% LTV) or try out the 80% LTV offset mortgage starting on 4.49%.

These aren't bad deals.  They won't snatch the sub-2% headlines from HSBC and Woolwich, but unlike those deals, you might be able to actually get this one for a reasonable fee (£995).  The fees and interest rates sit in good company with competitors, although HSBC and First Direct might have slightly lower rates for similar offers. 

Chancellor's temporary raising of Stamp Duty threshold has helped 112,000 homebuyers

Halifax, the UK's biggest mortgage lender and part of the Lloyds Banking Group, has released research figures showing that 31% of homebuyers have been able to duck under the Stamp Duty threshold in the ten months between September 2008 and June 2009.

The figure represents 112,000 homebuyers who were buying houses priced between £125,000 (the normal threshold) and £175,000 (the current threshold, temporarily increased to ease up pressures on the housing market).

For first time buyers (the group clearly intended to benefit most from the temporary measure), pushing the threshold up to £175,000 has had the most pronounced impact outside the south-east.  Consider that in Greater London only 34% of first time buyer purchases came in under the threshold, whereas in all the other regions combined the figure was 63%.

All this is great news for the market, but it does make us pause to think how it will be received by buyers if (or when) the threshold comes back down again.

What's more, it makes us ask two questions about Stamp Duty in the first place:

1. Should this tax (and it is a tax) apply to first time buyers at all?
2. Should Stamp Duty thresholds really be calculated on as raw a measure as the purchase price, since prices vary so widely between regions?

The Co-operative Bank likes its current account and banking customers so much, it's trimming nearly £800 off its typical mortgage fees for them.

And why not?, we say.  This kind of loyalty incentive is looking more common across the industry (see related story on Coventry Building Society).

The Co-op's new tracker deals are exemplified by the 3-year tracker that runs at 2.99 points above Bank of England Base Rate, giving a current rate of 3.49 per cent. It has a £199 fee. This and other tracker deals require borrowers to have an active current account at the bank.

Compare that to its fixed rate mortgages or its 3-year discounted rate mortgage—available to all comers, with a £995 fee—and you'll appreciate the difference.

What's more: Privilege or Privilege Premier current account customers, who pay subscription fees of £9.50 or more per month for a packaged account with complimentary benefits, can get the same deal for no fee whatsoever.  This also applies to Smilemore customers (the subscription current account offered by Co-operative Bank's internet-only offshoot Smile).

These loyalty bonuses aren't bad at all, considering there are other benefits to banking with the Co-operative anyway: a bank with an ethical policy and one that's been (perhaps not coincidentally) unshaken by the financial market mayhem over the last 18 months.

However, if you think base rates might go back up by a couple of points—and I wouldn't think a return to 3 or even 4 per cent within three years is unforeseeable—the question is whether you'd be satisfied with a tracker running that high over base to begin with.  We love the fee deal, but we'd be cautious about the mark-up!

What you save on fees, you'll more than repay in interest

Be careful if you're tempted by one of the no-fee deals being introduced this week by Northern Rock.

Of course, they're appealing to borrowers who have been put off by the need to pay at least £900 up front for other typical offers out there.  Many of us simply don't have that in spare cash.

But Northern Rock is no chump when it comes to profits: it increases its rates by up to a whole 1% in return for cutting out that fee. That's the kind of interest rate premium that could leave you cursing your pocket calculator in a year or two's time.

Facts on the new deals are as follows.  If you took out one of the new 2-year fixed rate deals, your options are:

• 4.09 per cent fixed until 2011 with a £995 fee, or
• 5.09 per cent fixed until 2011 without the fee.

So you'll save yourself nearly a grand today.  But 1% interest on a £100,000 mortgage is £1,000 a year anyway--not counting compounding, i.e. interest on top of interest. It doesn't take a maths whizz to demonstrate that this mortgage will cost you double what it saves you over the two-year fixed period.

If you're after low fees, try something rarer perhaps — for example, a discounted variable 2-year deal from Market Harborough Building Society (up to 75% LTV) costs only £245 in fees.

This reminds us of the old days of building societies.

Coventry Building Society, the nation's third biggest, has released a great new mortgage deal for first time buyers. It's:

• it's available up to 90% LTV
• it has a rate of 5.99 per cent, fixed for 5 years
• the application fee is only £199

...which sounds good to us, and—we're sure—many other would-be first time buyers. For a 5-year fixed rate that's currently a market leader.

But it's only open to members and their families...

Either you or your parents needs to be an existing member of the society. In this particular case, the deal is reserved for members or children of members with a current account or savings account held for over three years.

The deal also comes with a £500 IKEA gift card on completion of the mortgage—another nice perk.

Coventry's spokesperson said that the building society had a long history of preferential rates for members, and that it wants to reward loyalty as well as the discipline involved in saving regularly.

This used to be common practice among building society lenders, but the practice was eroded as they began to compete in order to expand market share.

If you're not a Coventry member, or have been a saver for less than three years, what's the next best deal you can get with them?  Only 85% loan to value (for the same interest rate and fixed period), and by the looks of it there'd be an extra £300 fee as well.

Let's see whether other societies also start restricting great deals for their membership. It could be back to the 1980s in another way.

Want more evidence that the flow of cash in the mortgage market might be starting to open up again?

Lloyds Banking Group has just priced and launched its first mortgage-backed bond this year.  This means that European investors are able to buy £4bn worth of bonds priced in either Euros or Sterling, all backed up by British residential mortgages from the group's Halifax Bank Of Scotland subsidiary.

The company says that it is helping reopen the European securitisation market, as there have been no new issues in over a year since Alliance & Leicester's £400m issue in August 2008.  

Why is this significant? Reaction from investors has been really keen, and this is one of a few small but important signs that the money markets that help loosen up lending in the UK are beginning to get back into gear behind the scenes.