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Property funds and decade-long deals: week in news

Property funds and decade-long deals: week in news

Property fund suspensions and 10-year fixed rates ended up dominating this week’s news, as the Brexit shockwaves continued to change the financial landscape.

These, and a few more key trends from the last five days, will now be fed into the grinder and compressed into an easily-digestible news sausage.

1) Property fund dominos

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It all began on Monday (4 July), as Standard Life Investments suspended trading in its £2.9bn UK real estate fund in response to increased outflows following the UK’s vote to leave the EU.

The following day, Aviva Investors suspended dealing on its £1.8bn property fund, with a spokesperson stating the firm has “acted to safeguard the interests of all our investors” in order to “meet our obligations to investors wishing to redeem their holdings”.

FTAdviser predicted this would only be the start of things, with analysts suggesting Henderson, Aberdeen and Schroders were also vulnerable to the growing sense of pessimism around commercial property.

M&G became the third fund house to freeze trading in the shares of its £4.4bn property fund and then on Wednesday (6 July), true to form, the gates fell on Henderson’s £4bn property fund after more than 1,220 investors removed it from their portfolios in just over a month, according to figures from FE.

By Thursday (7 July), it was Aberdeen Asset Management’s turn to blink, suspending trading in its £3.4bn commercial property fund for 24 hours to give shareholders the option to back out of the vehicle, although they face a 17 per cent hit to investments if they do so.

The same day, Legal & General Investment Management took another route, increasing the “fair value adjustment” on its £2.5bn property fund by 10 percentage points.

Prudential joined the crew suspending their property funds this morning, with UK stockmarkets remaining fairly stable amid the turmoil, although some multi-asset fund pickers took a dim view of the week’s events.

2) Decade long deals

On the other side of the property market, mortgage lenders were reacting to post-Brexit uncertainty and the probability of interest rate changes, by introducing low rates on long durations.

Announced earlier in the week, but launched today (8 July), both Coventry Building Society and the West Bromwich Building Society offered 10-year fixed rates.

The former’s deal was the cheapest of the week - priced at 2.39 per cent at 50 per cent loan-to-value - while the latter went for 2.79 per cent for 65 per cent LTV.

On Thursday (7 July) HSBC also launched a 10-year fix, priced at 2.79 per cent for up to 70 per cent LTV, along with research among more than 1,500 UK homeowners and current house-hunters at the end of May which found almost three quarters would consider fixing their mortgage for 10 years.

Meanwhile, Barclays decided to hide its new 10-year fix - 60 per cent LTV at 2.79 per cent - away among several other rate cuts across its range.

Brokers mostly welcomed the options, but warned of the in-flexibility of locking in for such a long time.