Lenders Cut Mortgage Deals by 10%
Wednesday, October 1, 2008 12:57
As the financial crisis hits the borrowers in the market, the mortgage rates are further rising for homeowners and landlords. According to an interim report, which was released in July, it is predicted that the mortgage market would take three years to recover from the global credit crunch.
The newly-nationalized bank and the country’s biggest buy-to-let lender—Bradford & Bingley, just closed its specialist mortgage arm—Mortgage Express to new business. Meanwhile, the second biggest buy-to-let lender—Birmingham Midshires, as well as Bank of Scotland, scrapped all their fixed-rate buy-to-let deals and raised the rates on the remaining tracker products by up to 0.5% points. Lloyds TSB also hit landlords with increasing its buy-to-let rates by up to 0.25% points. And a rates rise of 0.3% points on buy-to-let deals is also announced by Northern Rock. Last but not least, Abbey, Nationwide and Bristol & West, are all expected to raise the rates in the following couple of days.
Now, most lenders have tightened the criteria and require that rent represents 125% of mortgage repayments while the B&W was one of the last remaining lenders to allow rental income to equal 100% of repayments.
After the Government announced its possible postpone releasing the long-awaited report by Sir James Crosby to mid-October, former CEO of HBOS, into the mortgage market, to take account of the recent turmoil comes the sudden exodus of reducing mortgage deal numbers. As the buy-to-let deals number fell from 662 to 481, the landlords were worst hit by this week’s upheaval in the mortgage market.
Due to the lenders’ response to the ongoing inter-bank lending freeze, hundreds of mortgage deals in the market just vanished. According to some report, as lenders no longer had the money to finance them, around 10% of the mortgage deals were suddenly pulled from the market.
For instance, with few new landlords entering the buy-to-let market, the changes are mainly going to hit landlords coming to the end of fixed or discounted deals who will find that re-mortgage rates are much less competitive. It’s said that the lenders are raising the rates and cutting products as the last they want is to be bombarded with business and see their service levels suffer as a result.
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