David Prosser: Mortgage lenders crave a return to the good old days

Outlook Something curious is going on in the mortgage market. The Bank of England's base rate may have been at a historic low of 0.5 per cent for more than a year, but mortgage lenders are no longer sitting on their hands.

The good news is the cost of fixed-rate mortgages is falling. By the start of this week, the average two-year fix cost 4.52 per cent, less than at any time for seven years. Nor is it any longer the case that only those borrowers with the largest deposits are in a position to borrow. The total number of mortgages available has risen sharply in recent months, as has those available to those with smaller deposits. There are almost 500 products now on offer with a maximum loan-to-value ratio of 85 per cent.

Less happily, lenders are slowly but surely trying to wriggle off the hook on which the plunge in base rates has left them hanging – their standard variable rates (SVRs) are inching their way upwards and those mortgage providers which have previously guaranteed not to charge an SVR of more than a certain premium above the base rate are dropping the promise. Nationwide did so for new customers last year. Others have followed – notably Lloyds, the owner of Britain's largest mortgage lender, the Halifax.

What we are seeing, in fact, is a concerted effort by mortgage lenders to restore their market to some sort of normality – to the way things were before the credit crunch struck.

In those days, customers coming to the end of a special deal such as a fixed-term rate knew they would revert to a standard variable rate likely to be more expensive unless they began looking for a new offer. Lenders competed for business on the basis of those special offers.

We have not returned to the status quo just yet. There are still fewer deals on offer, particularly for those borrowers with the smallest deposits. And the availability of mortgage finance may get worse before it gets better, given the pressures on lenders to repay the emergency support they received during the crisis over the next couple of years.

Still, opportunity knocks for many borrowers. Base rates may begin rising sooner than we expect – the OECD has said Britain must raise the cost of borrowing before the end of the year. One way or another, the days of bargain basement standard variable rates now look numbered. But lenders want your business and for now, they're fighting for it. It may just be time to take advantage.

Energy bills are set to start rising again

Here's a challenge for a government that has so far been more timid on energy policy than it was while in opposition: it looks as if the market trends that enabled gas and electricity suppliers to cut bills earlier this year have gone into reverse. Further cuts are unlikely and there is a possibility of bills going back up. That will put the spotlight on ministers who once talked tough about the energy industry but been reluctant to spell out their plans now they are in Government.

What we know so far is that the Conservatives' pre-election pledge to refer the big energy suppliers to the Competition Commission has, under the coalition, turned into a review of the energy regulator Ofgem. You might think that spells bad news for Ofgem, in these days of public spending cuts, but since the watchdog is effectively financed by customers, there is no saving available to the taxpayer here. No, this is a review driven by questions about the effectiveness of regulation.

Those questions will feel all the more acute if pricing pressures reemerge. And many energy analysts believe they are about to. Last year, we got lucky – while oil prices doubled in dollar terms, wholesale gas prices fell. That enabled the energy industry to cut bills and the heat was taken off the regulatory system for a period.

Now, however, wholesale gas prices are rising again, despite relatively flat oil prices this year. The winter was a cold one in Britain and across Europe, and there were production interruptions in Norway. The UK is exporting its gas at the moment, in line with trading agreements, and looks set to continue to do so. Wholesale gas prices are up a third already.

For now, the mainstream gas and electricity providers look able to absorb those increases, though some of the cheapest deals on the market have disappeared. But if prices continue to rise, bills will go back up. And people will begin asking what happened to the Conservatives' promises to be tougher on the energy companies.

BA gets the Pensions Regulator on side

The Pensions Regulator's initial reaction to British Airways' deal with its pensions scheme trustees was "positive", the airline says. That's encouraging, since the BA case is right on the frontline of the battle being fought between the watchdog and employers with final salary pension schemes. The former wants to be certain there is no danger of companies going under and leaving a shortfall in their pension plans, while the latter are worried about being forced to make good such deficits very quickly.

If the Pensions Regulator does formally sign off on a deal that allows BA to make top-up payments over a period as long as 16 years, much longer than the timescales on which the watchdog generally insists, other employers will take some encouragement. It suggests the regulator is prepared to be flexible where it believes employers have the financial strength to stick around for the long term.

The added complication is that BA's merger with Iberia is effectively conditional on a satisfactory deal being reached on pension scheme funding. The regulator has the power to stick a spanner in the works and has done so in the past in other cases. That, so far at least, it does not seem minded to do so here will come as a relief both to BA and any other employer that has to deal with the watchdog.