{"id":48354,"date":"2017-04-11T21:53:00","date_gmt":"2017-04-12T01:53:00","guid":{"rendered":"https:\/\/prefblog.com\/?p=48354"},"modified":"2025-07-17T21:54:42","modified_gmt":"2025-07-18T01:54:42","slug":"april-11-2017","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=48354","title":{"rendered":"April 11, 2017"},"content":{"rendered":"

Interesting story about the effects of mortgage rule changes in the UK – there are some who have borrowed on a floating rate mortgage. This carries a higher rate than a two-year mortgage – for reasons which I do not understand, since the Gilt curve is normal – and they want to switch, but are not allowed to do so because they no longer qualify for a fixed rate mortgage. They’re called mortgage prisoners<\/a>:<\/p>\n

The customer, who asked not to be named, had been stranded on Bank of Scotland\u2019s standard variable rate (SVR) for over four years. He paid thousands of pounds a year in extra payments because the bank refused his requests to move to a cheaper, fixed-rate deal, and fell into arrears at some points.<\/p>\n

While fixed mortgage rates have fallen in line with the Bank of England base rate, lenders\u2019 SVRs have remained flat or increased (see chart, below).<\/p>\n

Thousands of people who took out mortgages before the financial crisis found they were barred from switching to new fixed-rate mortgages when existing deals ended.<\/p>\n

Lenders said rules introduced following the crisis, known as the Mortgage Market Review, meant existing customers now failed stricter \u201caffordability\u201d tests. This led to the bizarre situation where customers, known as mortgage prisoners, were told they couldn\u2019t afford to switch to cheaper rates.<\/p>\n<\/blockquote>\n

\"ukmortgagerates_170411\"<\/a>
Click for Big<\/i><\/div>\n

I don’t understand why the inversion exists, given the current gilt curve<\/a>:<\/p>\n

\"giltcurve_170411\"<\/a>
Click for Big<\/i><\/div>\n

But I have to say one thing … only an unholy alliance of bankers and regulators can produce the phrase ‘you can’t afford to halve your mortgage payments!’<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.4636 %<\/td>\n2,180.6<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.4636 %<\/td>\n4,001.3<\/td>\n<\/tr>\n
Floater<\/td>\n3.49 %<\/td>\n3.58 %<\/td>\n40,754<\/td>\n18.36<\/td>\n4<\/td>\n0.4636 %<\/td>\n2,306.0<\/td>\n<\/tr>\n
OpRet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.0196 %<\/td>\n3,028.4<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.93 %<\/td>\n4.21 %<\/td>\n59,998<\/td>\n0.65<\/td>\n6<\/td>\n0.0196 %<\/td>\n3,616.6<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.0196 %<\/td>\n2,821.8<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.27 %<\/td>\n-9.52 %<\/td>\n72,786<\/td>\n0.09<\/td>\n23<\/td>\n0.0034 %<\/td>\n2,793.0<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.06 %<\/td>\n5.03 %<\/td>\n115,688<\/td>\n15.36<\/td>\n13<\/td>\n-0.1480 %<\/td>\n3,009.0<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.33 %<\/td>\n3.94 %<\/td>\n242,964<\/td>\n6.66<\/td>\n94<\/td>\n-0.0512 %<\/td>\n2,386.9<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.97 %<\/td>\n3.92 %<\/td>\n143,887<\/td>\n0.12<\/td>\n31<\/td>\n-0.1612 %<\/td>\n2,900.8<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.52 %<\/td>\n3.10 %<\/td>\n54,299<\/td>\n4.54<\/td>\n9<\/td>\n0.2562 %<\/td>\n2,544.8<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
MFC.PR.F<\/td>\nFixedReset<\/td>\n-1.20 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 15.67
\nBid-YTW : 9.15 %<\/td>\n<\/tr>\n
MFC.PR.H<\/td>\nFixedReset<\/td>\n-1.00 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.71
\nBid-YTW : 4.47 %<\/td>\n<\/tr>\n
BIP.PR.A<\/td>\nFixedReset<\/td>\n1.04 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-04-11
\nMaturity Price : 23.10
\nEvaluated at bid price : 24.35
\nBid-YTW : 4.71 %<\/td>\n<\/tr>\n
SLF.PR.J<\/td>\nFloatingReset<\/td>\n1.14 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 15.93
\nBid-YTW : 8.42 %<\/td>\n<\/tr>\n
BAM.PR.B<\/td>\nFloater<\/td>\n1.22 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-04-11
\nMaturity Price : 13.27
\nEvaluated at bid price : 13.27
\nBid-YTW : 3.58 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset<\/td>\n143,727<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-04-11
\nMaturity Price : 17.44
\nEvaluated at bid price : 17.44
\nBid-YTW : 4.19 %<\/td>\n<\/tr>\n
SLF.PR.I<\/td>\nFixedReset<\/td>\n122,659<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.57
\nBid-YTW : 4.74 %<\/td>\n<\/tr>\n
RY.PR.Z<\/td>\nFixedReset<\/td>\n117,866<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-04-11
\nMaturity Price : 22.31
\nEvaluated at bid price : 22.60
\nBid-YTW : 3.77 %<\/td>\n<\/tr>\n
BNS.PR.B<\/td>\nFloatingReset<\/td>\n106,500<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.16
\nBid-YTW : 3.00 %<\/td>\n<\/tr>\n
RY.PR.Q<\/td>\nFixedReset<\/td>\n64,301<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-05-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.39
\nBid-YTW : 3.21 %<\/td>\n<\/tr>\n
TD.PF.H<\/td>\nFixedReset<\/td>\n61,993<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-10-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.50
\nBid-YTW : 3.38 %<\/td>\n<\/tr>\n
There were 30 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
PWF.PR.T<\/td>\nFixedReset<\/td>\nQuote: 23.10 – 23.44
\nSpot Rate : 0.3400
\nAverage : 0.2477<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-04-11
\nMaturity Price : 22.74
\nEvaluated at bid price : 23.10
\nBid-YTW : 3.81 %<\/td>\n<\/tr>\n

PWF.PR.A<\/td>\nFloater<\/td>\nQuote: 14.62 – 14.90
\nSpot Rate : 0.2800
\nAverage : 0.1999<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-04-11
\nMaturity Price : 14.62
\nEvaluated at bid price : 14.62
\nBid-YTW : 3.26 %<\/td>\n<\/tr>\n

BNS.PR.H<\/td>\nFixedReset<\/td>\nQuote: 26.45 – 26.66
\nSpot Rate : 0.2100
\nAverage : 0.1306<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2022-01-26
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.45
\nBid-YTW : 3.50 %<\/td>\n<\/tr>\n

MFC.PR.H<\/td>\nFixedReset<\/td>\nQuote: 24.71 – 24.92
\nSpot Rate : 0.2100
\nAverage : 0.1318<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.71
\nBid-YTW : 4.47 %<\/td>\n<\/tr>\n

IFC.PR.A<\/td>\nFixedReset<\/td>\nQuote: 18.98 – 19.24
\nSpot Rate : 0.2600
\nAverage : 0.1830<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 18.98
\nBid-YTW : 7.04 %<\/td>\n<\/tr>\n

MFC.PR.F<\/td>\nFixedReset<\/td>\nQuote: 15.67 – 15.88
\nSpot Rate : 0.2100
\nAverage : 0.1459<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 15.67
\nBid-YTW : 9.15 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Interesting story about the effects of mortgage rule changes in the UK – there are some who have borrowed on a floating rate mortgage. This carries a higher rate than a two-year mortgage – for …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-48354","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/48354","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48354"}],"version-history":[{"count":1,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/48354\/revisions"}],"predecessor-version":[{"id":48355,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/48354\/revisions\/48355"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48354"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48354"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48354"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}