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Return to the 'mortgage queue'
A return to the days when you had to put on your best suit and smile - and get in the queue for a mortgage - may be on the horizon, as an increasing number of lenders clamp down on the amount they are prepared to lend and to whom.
Nationwide Building Society, the UK's second largest mortgage lender, today announced it was increasing its two-year tracker rates by 0.57% for all new customers. The lender is also raising its entire range of fixed rate deals by 0.2 per cent, in spite of the fact that the Bank of England base rate has come down in recent months.
In similar fashion, Cheltenham & Gloucester, part of Lloyds TSB, increased some of its tracker rate mortgages by 0.3% - a move that was mirrored by Intelligent Finance - a division of HBOS. Experts say that the price hikes are due to a lack of supply of mortgage finance in the money markets.
But, pricing people out of homeownership with high rates is just one of a raft of measures lenders are taking to shut the door on borrowers whose business is considered not up to scratch. As well as turning their back on subprime business, many banks and building societies are continuing to reduce Loan to Values.
According to recent research from online mortgage service, mform.co.uk, there are now just nine lenders still offering 100 per cent mortgages opposed to 22 six months ago. Nationwide has already introduced a new 75% LTV tier, under which the best deals are exclusively available, while yesterday 139 'riskier' deals were pulled in the space of 24 hours.
Ray Boulger, senior technical manager at broker John Charcol, said: "Conditions in the mainstream mortgage market are now rapidly deteriorating at a frightening speed, with lenders changing their pricing and/or criteria at the fastest pace in living memory, and probably ever."
Other lenders are calling on more traditional measures to curb the demand from borrowers, many of whom have become accustomed to taking their pick of mortgage products; for example, restricting lending to borrowers who live within a 30 mile radius of a building society.
The combination of these factors is manifesting itself very clearly in the most recent figures from the British Bankers' Association (BBA). They show that 43, 870 people took out a mortgage last month compared to 65,637 in the same month last year.
Today, the London Inter-Bank Offered Rate (LIBOR), which is the rate at which banks lend to each other, stands at more than 6% - the highest point all year.
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