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Mortgage Product Availability Over Summer
The news from Skipton Building Society this week that they are withdrawing their 2yr fixed rate mortgage product has prompted discussion and debate within the financial services industry, some commentators see this as a signal that mortgage lenders are becoming increasingly nervous about whether interest rates will remain low over the longer term. The Skipton has said that it will be introducing new products on the 18th August but it is currently unclear whether the rates will be increased and/or changes to lending criteria and arrangement fees made.
Some mortgage products are scarce
Without a doubt some mortgage products are becoming scarce, mortgage brokers are reporting large numbers of rejections from some of the biggest lenders. Ray Boulger, senior technical director at John Charcol states that “Borrowers are being rejected at record rates, often for very minor indiscretions like being late with a credit card payment”.
Meanwhile Directline has reduced its arrangement fees and attracted new business from clients who appreciate this lower start up cost. Northern Rock has also reduced its rates on the everyday mortgage range including buy to let products. So it would seem that for the moment lenders are just as confused as the general public.
Fixed rate deals become more popular
Over the last three months there has been a change in the ratio of customers who are choosing a fixed rate mortgage product or choose a tracker or variable rate mortgage. During March just under 50% of approved mortgage applications were fixed rate products, this has now risen to over 60% (July 2010), demonstrating that the public are feeling uncertain about which way the economy will move over the coming months. Many customers seem to be weighing up the benefits of paying slightly more in the short term in order to lock in a better deal over the longer term.
Lending figures and range of mortgage products may increase
The summer holidays will be coming to a close very soon and city bankers will be back at their desks after a few weeks away from the office. The traditional frenzy of banking and business activity that follows the summer break will begin and at the moment no one is able to predict the way that the markets will go. The political climate will also be uncertain as parliament resumes and the coalition government begins to implement the economic measures that have been announced over the past few months.
Calls from the Government for banks to increase their lending to both private individuals and business customers via mortgages and loans have met with some resistance - unsurprising really given that generous lending by greedy financial institutions has been partly blamed for the world wide crisis. Barclays Bank has already stated that it will not sign up to any policy that means it has to increase its lending over the coming months and believes that it should stick to its current lending policy even if the government continues to exert pressure.
It would seem that lenders are being extremely cautious and adopting a policy of ‘wait and see’ to assess the economic outlook. First time buyers, borrowers with a slightly adverse credit history and buy to let investors are finding it increasingly difficult to find a mortgage deal that is comparable to those being offered to existing home owners with over 30% equity or new clients with deposits of more than 25%. It is generally agreed that the housing market needs an influx of home buyers but there are currently very few mortgage products that will approve more than 85% of a property’s value, and this situation is likely to remain the same for the foreseeable future.
Autumn will bring changes to lending policies
Analysts are waiting to see what the markets will do in September, the banks and building societies will react accordingly, mortgage products will adapt and reflect the economic outlook. Home buyers must make their own decision about whether they would like to take advantage of the fixed rate deals that are now on offer or are happy to wait until the autumn to see what new products may be available.
Bulger gives the following advice for anyone looking for a new mortgage product
“knowledge of the entire mortgage market is not only an enviable weapon, but absolutely critical to secure a competitive mortgage and sometimes to secure any mortgage at all........ in this environment a good, independent mortgage broker is worth their weight in gold”.
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