Products in the UK Mortgage market continue to vanish

Article source: Lorraine Turner -

Products in the UK Mortgage market continue to vanish

The number of mortgage products available in the British financial market has taken another blow this week following the nationalisation this week of Bradford and Bingley. The global financial market is undoubtedly in turmoil. Fewer mortgage products means less choice. Less choice in a market like this can only mean higher interest rates from lenders and more problems for the consumer.

According to Reuters (the news agency) the total number of mortgage products available in the UK market has dropped circa 12.5% following Monday’s nationalisation of Bradford and Bingley. According to in real terms this means drop from 3,914 to 3,427.

Nearly 75% of Bradford and Bingley’s mortgage book was geared to the buy-to-let market. The lenders exist from the market means that there are now 195 less products available. The Government has taken control of Bradford and Bingley’s £41 billion mortgage assets and has announced plans to wind it down which for lay mans mean that they will sell the assets off once the market begins to recover.

The property market in the UK is drying up, the demise of Bradford and Bingley the nation’s biggest buy-to-let lender is a sure sign of that. Many property developers and landlords will now be more worried than ever.

According to Channel 4 News today property prices have dropped for the eleventh consecutive month, a sure fire example that the recession is well under way.

Mortgage lending in August 2008 was down 95% on the previous month. According to Bank of England data, just £143 million was leant out. This is the worst month in real terms since the bank of England records began in April 1993.

Many in the city are now looking to the Crosby report which is due to be released on the 13th of this month for it’s recommendations, some believe that it’s finding will to much to revive the market and add much needed liquidity to the banking sector.

In light of the activities of the last two week many lenders are beginning to react. BM Solutions, a Mortgage Subsidiary has already raised it’s rates and lenders like UCB Home Works and the Mortgage Works and planning the same.

One of the main differences between this credit crisis and the last recession it our property market is heavily geared towards the buy-to-let market and furthermore that the buy-to-let investors have, unsurprisingly concentrated their investment in areas of high demand like inner cities and university cities. This will undoubtedly add further pressure and will create pockets where the falling property prices will greatly higher than the national average.

With the average two year fixed deal at 6.28% some lenders who previously had favourable products have had to withdraw them from the market due to high volumes of applications. Others like the Halifax have increase the deposit required on a two year fixed deal from 10% to 25%. Others are likely to follow.

With the bank run on Northern Rock, the nationalisation on Monday of Bradford and Bingley and amongst other things the collapse of Lehman Brothers, the forth largest bank in the world there is a huge amount of pressure on banks and understandably a distinct lack of trust.