The number of mortgage products available in the UK has fallen by over two thirds in the past twelve months, according to Moneyfacts.co.uk.
The onset of the credit crunch has decimated the UK market, with a sharp reduction in the number of specialist mortgages available and an equally sharp rise in the cost of home finance.
Moneyfacts.co.uk’s figures show there were 13,027 mortgage products available in the UK in August 2007. This has fallen by 72% to just 3,748 this month.
Specialist mortgage products have been the hardest hit by the crunch, with riskier product offerings almost disappearing completely.
A year ago, 11 lenders, including Northern Rock, were offering mortgages worth more than 100% of a property’s value, but today there are no similar products on offer. Even mortgages of 100% have become very rare, with just two lenders offering to lend the full value of a home, down from 33 in 2007.
Self-certification deals have also been cut back, with just 21 lenders in the market compared to 44 in August last year, while the number of sub-prime lenders has fallen from 37 to just 13.
As the number of products available has fallen, the cost of mortgage has been steadily rising, despite several reductions in base rates since the summer of 2007.
“The standard factors which usually determine the rates at which mortgage rates are set, including bank base rate, swap rates and Libor rates are all much lower than this time last year, yet the rates on offer are much higher,” says Michelle Slade, analysts at Moneyfacts.co.uk.
“As house prices continue to fall and the risk of default increases, the lenders are pricing more for risk and as a result these standard factors are not quite as influential on the rates as they once were.”
The cost of an average two-year fixed rate mortgage has risen from 6.56% to 6.9% over the last twelve months, and the cost of a three-year deal is 7.13%, up from 6.54%. Mortgage fees have also risen, with the average fixed rate fee climbing from £803 to £964 this August.
Slade believes the market will improve with time, but adds: “The number of products will steadily increase and rates will lower with increased competition between lenders. However, it will be a while before lenders regain a healthy appetite to lend with the maximum LTVs on offer largely determined by the future decline in property values.
“With all the above said it is highly unlikely that we will ever get back to the same levels that we were at a year ago.”
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