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26 March 2008

Fall in mortgage deals on offer

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by Kay Mitchell

Fall in mortgage deals on offer

Research from Moneyfacts, the financial information service, shows that since last July, the number of mortgage deals on offer has fallen from 15,599 to 5,725.

The credit squeeze has resulted in mortgage lenders running out of cash. Demand for mortgages remains strong but cannot be fully met from existing funding. This has led many lenders to reduce their product ranges, increase their mortgage prices and, in some cases, to reduce their lending capacity, according to the Council of Mortgage Lenders (CML).

The CML added that the number of new mortgages being taken out by home buyers is at its lowest level for nine years.

Moneyfacts said the biggest falls have been among sub-prime and buy-to-let mortgages. The number of sub-prime deals has fallen by 81% to just 1,798 while the number of loans available to buy-to-let landlords has also slumped by 60% to 1,444.

First-time buyers are also hit as many lenders have scrapped their 100% plus mortgage range, meaning they have to find money for deposits, stamp duty, legal fees and furniture.

Major lenders, such as the Cheltenham & Gloucester, are now demanding that borrowers put down deposits worth at least 10% of a property’s value.

Earlier this month, Nationwide, announced that homebuyers should prepare themselves for a new era of mortgage lending of putting down a huge deposit. The lender is adding a further 0.2% to the prevailing interest rate, so a 2-year fixed rate deal will now be charged at 6.05% instead of the 5.85% rate charged for loans for less than 75% of the valuation.

Ray Boulger at mortgage broker John Charcol said Nationwide has effectively priced itself out of the first-time buyers market. Other lenders will follow which is bad news for borrowers.

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