Lending conditions tighten as there is a drop in the number of mortgage deals

According to figures just released today there has been a decrease of almost two-thirds in the number of different mortgage deals available since last summer. In July 2007 borrowers could choose from 15,599 deals, and according to Moneyfacts there were a mere 5,725 by last week.

Those worst affected are the people with poor credit histories. Lenders have progressively been tightening lending criteria and are now far less willing to take on anyone who could potentially pose any risk to them. Therefore, the products available to this group has been dramatically reduced.

Buy-to-let products have seen a 60% drop since last summer, bringing their number of products to 1,444. Also there are only 2,565 different mainstream mortgages on offer at present. This is a decrease of approximately a third from the 3,803 that were on offer last July.

Today, Dunfermline Building Society announced that they too were to stop offering 100% mortgages. This now means that the Abbey are the only lender offering unconditional deals within this type of market. The downside to this is that the rates are fairly high and will not be helpful for those wanting to take their first step onto the property ladder. They offer a 2 year tracker rate of 2.99% above base rate, making it currently 8.24%, whilst its 2 year fixed-rate deal is set at 7.94%.

Moneysupermarkets’ head of mortgages predicts it will be a minimum of 3 years before the mortgage market settles down to normality again, and even then we will not return to the same level of deals and availability we were used to. She reckons it has still to get worse before it gets better, and estimates another year before the market stabilises to any great effect.

Another type of deal which has greatly diminished is the ‘100% loans to graduates’ or as guarantor mortgages. Last november there were over 40 lenders offering this, now there are hardly any lendrs doing so. One of the very few are Bristol&West who offer 100% mortgage under the umbrella of “First Start loans” which is when first time buyers can take out jointly with their parents. They have just increased their rates o these deals by 0.9%

Risk consultancy firm Protiviti conducted research which showed 79% of mortgage brokers expect lenders to increase the difference in rates from what they offer borrowers and that of the Bank of England base rate. 85% of them also predict problems for homeowners in their attempts to secure a mortgage over the next year or so.