Philip Machin, market analyst consultant at CACI, said that next year would see lenders do battle with introductory rates. He also claimed that 2008 would be the year of the balance sheet lender as those who have money will continue to be able to lend.
Machin said: “In the first part of next year the money markets will settle down but I believe we will see some ‘equalisation’. This is where people who may have £100,000 now will move that around several building societies. This will mean that the £35,000 that is protected by the government will be secure, and the consumer will have three accounts.”
He claimed that this would benefit some building societies but it would lead to some competition for funds and lenders who were reliant on deposits wiould be competing on rates.
Machin said: “A few building societies in the small to medium arena are competing to get funds in to compete financially so they will be in a reasonably good position. Securitisation will carry on and come back in time, but there will be uncertainty for some time.
“Small to medium lenders will not be awash with cash but as depositors are putting money into several places, some people are going out and getting good rates.”
Neil Johnson, head of PR and policy at the Building Societies Association, said: “It is a more difficult trading market than a few months ago. Balance sheet lenders are less reliant on wholesale funding and building societies do have an advantage in that respect.
“There is a lot of money going into building societies as interest rates went up people have been encouraged to save more.”
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