Mortgage deals slashed in an instant
Article source: James Charles - www.timesonline.co.uk
A large number of mortgage products have disappeared from the market over the last three days as lenders reacted in response to the current inter-bank lending freeze in progress.
According to Moneyfacts.co.uk, roughly ten percent of the current mortgage products were unexpectedly withdrawn because mortgage lenders no longer had the cash to be able to lend against them. In this particular instance, the overall number of mortgage products plummeted by 445, in one to day, to a worrying 3,469; this equates to over a 10 percent drop.
These drastic actions from lenders came amid news that the Government is to delay the release of an anxiously awaited report by Sir James Crosby, the Ex-Chief Executive of Halifax Bank of Scotland (HBOS). The report takes a keen look at the current mayhem rocking the mortgage market. The much awaited Crosby report which was to be released by the end of September has now been timetabled for mid October.
According to a short term report made public in July, the mortgage market would require up to about three years to fully recover following the world wide financial crisis.
It was this week’s commotion in the mortgage market that saw property owners greatly affected like never before as the volume of buy-to-let mortgage products actually available went down from 662 to a low 481. Approximately eighty five per cent of all buy-to-let mortgage products have been pulled in the last year where as more than sixty per cent of residential mortgage products have been withdrawn; figures given are based on the statistics drawn from the Moneyfacts.co.uk website.
One of the country’s leading buy-to-let lenders, Bradford & Bingley, which has had it’s mortgage book taken over by the Government, and subsequently had its branch and savings and deposits business taken over by Santander, closed its consultant mortgage division, Mortgage Express, to new business.
Two of Halifax Bank of Scotland’s (HBOS) owned institutions, Birmingham Midshires (the second largest buy-to-let lender) and the Bank of Scotland got rid of all fixed-rate buy-to-let transactions and increased rates on their remaining tracker products by up to half and percentage point.
Property owners were slapped with a hike in buy-to-let rates from Lloyds TSB. Lloyd TSB’s mortgage division Cheltenham & Gloucester will in the near future be imposing an increment on the two and three year fixed rate deal by up to 0.25 of a percentage point. In the same light, Northern Rock has also increased its lending rate by 0.3 of a percentage point on buy-to-let transactions.
Abbey, Nationwide and Bristol & West (B&W), are in the coming days expected to increase their lending rates in the next couple of days. Bristol & West (B&W) was among the few remaining lenders who permitted rental returns to equal 100 per cent of mortgage repayments. However, a number of lenders are now applying stringent rules and require the rental income of the property in question is equal to 125 percent of repayments.
Take for example, a landlord who applies for a £ 140,000 mortgage with a six per cent interest rate a couple of months ago would have been required to earn £ 700 per month in rent. A property owner earning £ 700 a month in rent would presently only be able to acquire a loan for £ 112,000.
The cost of wholesale borrowing to finance fixed-rate mortgage products has witnessed a radical jump whilst inter-bank lending has completely withered out, in the last couple of weeks. As a result, this has rapidly seen an overwhelming increase in rates by lenders recently.
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