More blows towards the mortgage market

Article source: Lin Freestone -

More blows towards the mortgage market

With the recent financial crisis hitting national economies and leaving banking institutions falling down faster than anyone could imagine, Moneyfacts, the personal finance researcher has come up with news that will continue to shock and disappoint borrowers who do not seem to see any forthcoming solution for them and their homes in the near future.

Moneyfacts has revealed that close to 600 mortgage products have been withdrawn from the market in just a week and that further withdrawals are more than likely. This has hit borrowers the hardest because they are faced by a whole range of new challenges when it comes to their existing mortgage deals. Those who are coming to the end of their fixed rate deals are faced with the prospect of applying for a new deal in what is a very uncertain time, financially speaking.

A lot of mortgage products have been rapidly withdrawn from the market; this situation has been escalated by the recent nationalisation of the Bradford & Bingley. This has left many favourable and discounted arrangements terminated and borrowers who are looking to secure new arrangements scratching their heads at the products, with higher fixed rates, that are now on offer.

The market situation has elicited so much emotion amidst borrowers who are crying foul over losses in their property values, as well as getting confused about which way to turn. At the same time there is not much choice available and because of the tough market conditions, this situation does not look likely to improve any time soon.

Some other factors to be considered are the lower loan-to-value ratios available and the fact that some borrowers will not be able to access any mortgage products if the value of their properties should continue to fall; indeed many may fall in to negative equity. Market experts are advising borrowers to move quickly and seek advice from their mortgage brokers in this regard, especially anyone close to the Loan-To-Value limit because anyone needing more than the maximum will be at a great disadvantage when it comes to finding a suitable rate for remortgaging.

The number of mortgage products available on the market have fallen from a approximately 3,983 to 3,402, in a period of just one working week, according to Moneyfacts; a figure widely reported at the lowest number of available products ever recorded.

It is the not knowing what is going to happen next that is the worst part; everyone is acting on speculation and hoping that the situation is going to turn around. At the same time, safety measures have to be taken because the recent market activity suggests that it could get worse before it gets better.

An option for those optimistic that the rates will not fall so fast is go for a base rate tracker mortgage with no or minimal tie in and then switch to a fixed rate mortgage immediately as soon as the rates rise. This is a bold and risky move but many brokers are advocating against it; they want their clients to opt for fixed rate mortgages because it is better to be safe than sorry.

Everyone is bound to be affected in one way or another and more so those who have to go deeper into their pockets to get the best mortgage deal. A good example is those individuals whose are above the LTV ratio; they will undoubtedly have to chip in with their savings to reduce their LTV ratio in order to access the best mortgage product available with the most preferential interest rate. The only people who will be lucky to get good deals are those with 25% or more deposit or those with existing equity in their current property.

Even though the Bank of England is set to reduce mortgage interest rates in order to stabilise the market, it is still uncertain how this will play out and whether this move will bring down mortgage rates in any significant way.