Looks like Standard Life has given up trying to be a bank – despite 6 years of profitable operation.

The insurer has sold its Standard Life Bank operation to Barclays, which shelled out £226 million for the acquisition and says it doesn't expect to shed any of the 270 Edinburgh-based staff.  Since the cash price was a 23 per cent discount on the bank's theoretical value, Barclays should be able to afford a spot of leniency on matters like that.

And it looks like they're getting a good deal.  Standard Life Bank has a mortgage book of around 48 per cent loan-to-value ratio, slightly higher than Barclays' at 44 per cent but not by much. The only 100 per cent mortgages in the portfolio were granted to professionals and are therefore considered kosher.  This deal boosts Barclays mortgage book by 10 per cent, so you can see why its head of banking called the acquisition "a great fit".

Why did Standard Life let go of a relatively untroubled mortgage lender with a decent market position before it had recouped all of its set-up costs?  Chief executive Sir Sandy Crombie explained that the board of directors didn't think a further expansion into banking would help the group's long term strategy. 

And what are mortgage borrowers going to be missing?  Standard Life was a reasonably innovative lender.  It made a big splash in the early part of the decade with market-beating interest rates and customer-friendly loan products. It pioneered flexible offset mortgages and long-term fixed-rate mortgages.  Other pioneers will surely rise up to take its place as the mortgage market rumbles back to life, but not everybody catered for those kind of borrowers' needs so well.

This could just be a rumour, but it looks like Virgin Money has lured a former Northern Rock chairman onto its board as it pursues a banking licence.

Virgin positioned itself as a bidder for Northern Rock before the bank's eventual nationalisation in February 2008, and it is still determined to become a High Street banking player. Now, Bryan Sanderson (chairman of Northern Rock until October 2007) has been appointed as a non-executive director to Virgin, which suggests a renewed bid for Northern Rock could be on the cards. 

This time round the deal could be even sweeter - although they're certain to face competition from certain financial giants.  The reason why is that government plans to split Northern Rock into a 'good' and a 'bad' bank are set to be approved.  Virgin would now effectively be bidding for the icing on the Northern Rock cake: the decent assets, the worthy loans, rather than the messy leftovers of an infamous high-octane lending spree.

And one factor that will count in Virgin's favour?  The Government is keen to encourage new entrants into a banking market that has seen many players disappear or raise the white flag.  Virgin is hardly brand new to finance, but in the world of mortgages it has been "missing in action" for six years since passing on the One Account to RBS in 2003.

In recent years Virgin has hardly been coy about its ambition to be a High Street bank, and today it looks like it could be one step closer.

Things are all going a bit fee-free lately.

Several lenders are taking the initiative to cut down or remove product fees as cash-strapped borrowers plan their next moves in the mortgage market.  And some of these deals are starting to look a bit more worthwhile compared to their fee-paying alternatives.

Take Alliance & Leicester's four year fixed rate mortgage for example. If you opt for the 'standard' version, you get 5.09% but pay £995 up front.  However, forego the fee and you get 5.59% fixed.  Now, that's only a 0.5% premium which isn't catastrophically higher.  The difference on a £100,000 mortgage is around £50 a month.  So it's clear that the fee option is still better value overall; the payoff is within 18 months,  Nevertheless, if you don't have the cash, this is more attractive than many deals with a less modest no-fee interest premium.

Britannia has a similar margin on its fee-free fixed rate mortgages: five years at 5.59%, ten years at 5.69%, both set no more than 0.5% above the rates it offers for applicants paying £999 fees.  Northern Rock's margin on a no-fee mortgage also comes in below 0.5% on most loan-to-value scenarios.

The problem with most of these fee-free deals, though, is that they're not available with low deposits.  So it's clear they are being offered to tempt remortgagers rather than first time purchasers.

Also, why are these options only available on fixed rate mortgages?  This is at a time when tracker mortgages are surging in popularity and fixed rates are pegged a long way over base.  HSBC is one of the few exceptions. A first time buyer with a 25% deposit can get an HSBC fee-free tracker at 3.29% over the Bank of England base rate for the life of the loan.  Tie-ins?  None.  Still, though, if you'd pay £799 in fees, you'd get base rate plus 2.45%.  So that's a less favourable 0.84% premium.  Moral of the story: despite these fairly promising moves, if you want a good overall deal, get a fee!

Mortgage market rehabilitation signs are all around us, as Mortgage Brain reports a big increase in the number of different deals available through mortgage advisers.

Technically speaking I should say mortgage 'intermediaries', as this covers not only mortgage brokers but also IFAs and other kinds of middlemen (and there's really a big need to clear up all the terminology, but that's dealt with thoroughly in the FSA's mortgage market review paper mentioned yesterday...)

So, back to the market news: a 15 per cent increase in one month in the number of schemes your mortgage adviser can theoretically provide.

The total stands at 2,868, which might be a lot lower than the 10,000+ options available during the peak years but is still quite a jump compared to June, July and August. Why is this good news?  It means that

• there'll be stronger competition between lenders in the intermediary channel, and
• there'll be stronger competition between going-direct-to-your-lender and using-an-adviser services... and for most of the credit crunch, it's advisers that have felt the squeeze more keenly than banks.

In other words, an uplift in product availability for intermediaries helps to safeguard an endangered species: your savvy, personal-service and impartial local mortgage adviser.

Interestingly too, the products showing the biggest increase were tracker mortgages: a 32 per cent increase to 666 products.  Compare that to fixed rate deals (up 14 per cent to 1,804) and variable rates (dropping 4 per cent).  Many advisers will be recommending not trackers per se, but only the best tracker mortgages with low ERCs or no tie-ins at all, so the added choice will be welcome.

Higher loan-to-value mortgages showed a boost of 8 per cent and buy-to-let deals were also booted by a generous 20 per cent, which is welcome for advisers as both types of deal are in demand from their clients.

However, the bad news is for adverse-credit clients. Advisers don't have many more arrows in their quiver for sub prime woes: numbers of deals are static at around 250, an all time low in the Mortgage Brain figures, which reminds the industry and borrowers alike that we're still in turbulent times.

The FSA wants to do away with self certification mortgages, according to its mortgage regulation discussion paper released this morning.

The paper dealt with a lot of other matters too, but it was the self-cert recommendation that met with the loudest protest from mortgage brokers and those representing borrowers.

Would banning self-cert (or at least, 2007-style self-cert) really penalise as many potential borrowers as it has been claimed?

I'm not convinced the protests are all that justified. Here's why...

First, the suggested ban is on outright self-certification: saying you can afford a loan without having to provide any sort of proof.

What it's not is a mortgage ban on the self-employed.  It wouldn't prevent mortgage lenders from finding other ways to certify borrowers.  It just might require borrowers and lenders alike to be a little less lazy, or a little less hasty.  Now that we're on the sour end of the housing bubble, who could disagree with that?

For the borrower with complex cashflows that don't provide a Xerox-ready payslip, there are various ways that affordability can be demonstrated. I don't buy the following quote from Katie Tucker of Mortgageforce:

“The harsh reality of it now is those who cannot quantify their income will not be able to get a mortgage; the whole group will be removed from the market.”

Honestly, who can't quantify their income? Those who get paid in chickens?  Fair enough, but they're probably building their own farmhouse, not looking for a £150k loan on a flat in Manchester.

Everyone can quantify to some extent.  The discussion paper simply calls for verification of income.  It doesn't specify how lenders should do this.  But it does say: don't just skip the step.  

Second, let's be frank: that kind of self-cert was too easy.  Why else were so many borrowers (up to 6 in 10 mortgages) choosing this method?

Plenty of employed people were – and they're not whom it was intended for.  Because it was easy to self-certify, this enabled employed borrowers to get around other lending criteria such as income multiples.  And in the stampede to get on the ever-escalating housing ladder over the last decade, it's not surprising that people took any route they could. 

A crucial change of assumption in the FSA's discussion document is that it no longer expects borrowers to act rationally and protect themselves from credit exposure.  And to be fair, there's plenty of evidence to back up this view.  The report generalises as follows: 

“Mortgage borrowers are typically motivated by an immediate want or need [...] in many cases the mortgage is simply the means by which the consumer can get the desired home, car or holiday – with the consumer focusing much more strongly on the end result”

The point is: if it's possible to go around barriers like income verification checks in order to get a large amount of credit, people will do so.  Hence the proposal to remove the loophole.

How best to assess borrowers?

There's always going to be a dilemma over the best way to measure a borrower's eligibility, and lenders have already started moving away en masse from one lazy way of doing that - straightforward income multiples - towards the more 'nitty-gritty' approach of assessing affordability.

So it's not too much of a leap to dismiss another way of doing it.  Yes, it'll cost lenders to do more thorough checks.  Unfortunately this cost will probably be passed on to borrowers.  But we're currently (as taxpayers) already shouldering the costs of failing to adequately check out potential borrowers.

Either way, we won't be mourning the demise of old fashioned exaggerate-your-income mortgages, and we think it's inevitable lenders will move towards more of a know-thy-customer model.

What do you think?

It's unusual for a fee-free mortgage to really mean "fee free" - but First Direct seems to mean it.

Their two new offset tracker mortgages are designed to appeal to borrowers moving their mortgage from another provider.  These are borrowers who are often put off by the high charges for booking and arrangement.

There are other mortgage deals without arrangement fees, but they often do have other charges to pay: for example, valuation fees, exit fees or (most commonly) early repayment charges.  That's what makes it remarkable that First Direct's deals have none of these – just a closure admin fee.

Let's look at the trackers in more depth:

• Up to 60% LTV: tracks 2.49% above base rate, currently 2.99%
• Up to 75% LTV: tracks 2.94% above base rate, currently 3.44%

That's really all there is to say. No fixed periods and no fees.  We're impressed.

Remember that they're offset mortgages, so they function best if you've got savings too (to offset the mortgage interest – or to look at it another way, to earn up to 3.44% on your savings tax-free).  Also, those tracker rates won't look so appetising if or when the base rate goes back up to four or five per cent, whenever that may be.

Nevertheless, for now, these look like appealing deals for those with at least 25% equity in their current property value.  And the catch, if you can call it one, is this: they're only available for a limited time.

Hot on the heels of our recent chat about Chorley, here's another regional building society with a potentially table-topping deal.

Hanley Economic Building Society is a 155-year old society with five branches in Staffordshire, and it's currently offering a two-year fixed rate of 3.69%.

The rate is the lowest currently available for mortgages up to 70 per cent loan to value.  It ranks amongst the best in the 2-year fixed rate mortgage market, including the 60 per cent deals.

A fee of £895 is pretty average in the market, and there are a couple of other appetisers as well: you can re-mortgage to this deal with free legals, and you can overpay the capital up to 10 per cent a year with no penalty.

If you're happier to go variable and save more interest in the meantime, there's a 2.95% two-year discounted variable rate. This is also fairly competitive, although it's not a category leader like the fixed rate option.  You might also enjoy the more personal service that a small building society provides, though.

Meanwhile, following on from the discussions on Chorley & District's geographical lending limits, how's this for strictly local?

Hanley offers first time buyers a fixed rate mortgage with a 90 per cent loan to value limit.  It charges 5.99% interest over three years and fees are a not unreasonable £649. Even so, their definition of local is far stricter than the Chorley's: this mortgage is only available on properties within a 25 mile radius of the society's head office!

So, supposing you're not a Staffordshire first time buyer but you want a firm roof on your repayments for two years and have 30 per cent deposit, take a look at the Hanley Economic.

You could be forgiven for being confused about mortgage market news lately.

Here are two headlines, released hours apart: "UK Mortgage Lending Revival Continues", and "Mortgage Lending Continues To Fall".

Talk about an apparent contradiction. But both would claim to be giving the true picture. Here's why...

What's Falling

Remortgaging.  Previously a big chunk of mortgage lending activity was spoken for by people switching, moving or extending their mortgages. This accounted for as much as 40 per cent of mortgage enquiries, although not 40% of actual borrowing when you factor in repayment of existing loans. Nevertheless, with people drawing on increases in equity to repay their consumer loans, remortgaging has been big business during the mortgage boom.

And why's it dropping now?  In short, low base rates and falling Loan To Value limits mean that people either can't remortgage, or don't want to. For many who would, it's a case of 'wait and see'.

The size of the drop is enormous – around 57 per cent down from the market peak.  However, luckily for all those mortgage middlemen, a different part of the market is rising rapidly... 

What's Rising 

First time buyers. They're like a tide: having been held back for nearly two years by the credit crunch, buyers seeking their first mortgage are being encouraged by stable low mortgage rates, reports — accurate or otherwise — of a bottoming-out in house price falls, whispers of economic recovery and the returning availability of lower deposit (higher Loan-To-Value) mortgages.

Ditto home movers.  A loosening-up of tight credit conditions, particularly a renewed willingness to lend by the bigger banks, has supported both lenders and buyers who have lost their terror of dropping house prices.

The rebound among first time buyers and movers isn't accounting for enough lending to negate the effect on the overall figures of the drop in remortgaging. But in context, purchase lending is resurgent enough to warrant the 'revival' headlines.

Other factors behind the headlines

There's a clutch of other reasons why some news sources report 'fall!' as others shout 'rise!'. 

Some report monthly figures and compare them to the previous month.  Others plot the year-on-year trend.

Some refer back to the market peaks of 2006, others draw a different benchmark.  

Some report numbers of applicants; some report approvals; others report the amount of money being lent out.

There's only one thing we can generalise: it's a time of mixed signals!

Viewed in gross lending terms, we have two lines (remortgage and purchase) that are moving in opposite directions.  They crossed over in May 2009 this year, and continue to diverge. 

In short, if you view 'the mortgage market' to mean strictly gross lending, the headlines that say 'falling' are accurate in several ways.  But if you intend to read mortgage figures as a reflection of housing market activity, descriptions of a 'revival' are more or less justified.

They're a tiny lender by national standards, but Chorley & District Building Society's best-buy mortgages have attracted national attention. 

Unfortunately for the majority of mortgage applicants, they're not always available nationwide!

Although Chorley & District will lend up to 75 per cent loan to value anywhere in the country, some of its most appealing deals are only available to those living in the North West.  This isn't a precisely defined geographic area; it's probably safe to say that if you can find a branch, you're close enough...

An example of an interesting mortgage that's only available locally is the 1-year fixed rate with maximum 90 per cent loan to value. Although it's only fixed for one year, the rate is 4.99% - almost unheard of in the rest of the marketplace for a 90 per cent deal.

If you're based outside the area, there are still interesting products to choose from.

There's a 2.00% discounted variable rate available up to 75 per cent LTV, which is a 'stepped' discount over three years.  In year two the interest rate moves to 3%, in the third year to 4% before reverting to Chorley's standard variable rate (currently 5.49%).  There's also a 1-year fixed rate deal at 3.25%.

Upsides: you can blend their products.  They allow you to take out your mortgage across different 'schemes' as long as each portion is at least £25,000. So you can have part tracker, part fixed rate if that's what you want.

Downsides: Chorley's mortgages still have a higher lending charge, so if you want to borrow over 75% of property value there is an additional amount to pay, between 5.5% and 7.5% of the difference between 75 per cent of the property value and your actual loan. I appreciate that's confusing, so as an example, if you were borrowing 100,000 on a 120,000 property (83% loan to value), you'd pay 6.5% of £10,000, or an extra £650.

Summary: if you're Lancastrian with a high loan to value, if you're looking for an ultra low first year rate with gentle increases (and don't mind facing a 2.49 per cent early repayment charge), Chorley Building Society could be well worth a look.

This is a blog note

We're not the only mortgage commentators to feel that the rapid growth of product fees has created an unwanted norm for applicants.

Nowadays, mortgage applicants are almost universally faced with a bill in the region of £1,000 for switching their mortgage.  What's more objectionable is how swiftly they've increased.  In 2006, the average mortgage product fees totalled £514; in just two years, that average almost doubled to £944. For a bit more context, consider that back in 1992 the average fee was just £98 - and there was a lot more work involved in the application process in those pre-internet days.

It seems clear that lenders have collectively jumped on the fee bandwagon so that they can gather their profits sooner on the mortgage deals they issue. An attempt by Alastair Darling to threaten lenders with FSA action on fees was predictably ineffective. The only thing that can reign in this proliferation of fees is a healthy dose of market competition, and so far that's been absent.

But is that finally about to change?

Firstly, fees are coming down for the first time in ages.  According to Moneyfacts, the size of the average fee charged on deals in the last six months took a dip from £944 to £925.

Secondly, a flurry of reasonable fee-free deals are on their way. It seems that major lenders are realising that many customers resent jacking up their loan by £1,000 or more just for applying, and they're finally competing to tempt those customers.

A&L, Britannia and Northern Rock have all introduced fee-free mortgages with a relatively modest 0.5% margin over their equivalent fee-bearing deals.

The Alliance & Leicester four-year fixed rate mortgage, for example, will charge 5.09% with a £995 fee, and 5.59% without.Britannia has fee-free fixes for both five and ten years, at 5.59 and 5.69% respectively, which are set no more than 0.5% above the rates it offers for people paying £999 application fees.Northern Rock's premium for a no-fee deal also comes in at under 0.5% on most loan-to-value scenarios.

However, not every borrower can benefit.  Arguably, the borrowers most in need of fee fee deals - those without a large amount of cash set aside - are the least able to find them.  Big deposits of 25-30 per cent are required for most of the above options.

It's also noticeable that this competition is so far confined to fixed-rate deals, which have higher interest payments to begin with than trackers at the moment. HSBC is one of the few banks to offer a fee-free option on its tracker mortgages. Again though, you have to be a first-time buyer with a 25% deposit to get one. How many of those are there?

Conclusion: it's great that there's some competitive activity on fee-free deals, as it might start to challenge the hegemony of four-figure fees. But lenders will have to go a bit further if they're going to provide options for the majority of applicants.