Managing the mortgage mayhem

The past couple of weeks have seen mortgage mayhem with an unprecedented number of deals withdrawn by lenders, mortgage firms ceasing business and others setting new rules about who they will lend to. First Direct, for example, announced that it was stopping lending to new customers while Lehman Brothers confirmed it was closing its two UK subsidiaries, SPML and Preferred. Meanwhile, the Co-operative Bank withdrew all its two-year mortgage deals.

Mortgage mayhem

Lenders have been clamping down because the credit crunch has curbed their ability to raise funds. According to Trigold, a sourcing system used by mortgage brokers, there are around half the number of mortgages available now compared to six months ago with 23,000 mortgages having 'disappeared'. Other lenders are simply upping rates. Nationwide raised rates on its tracker and fixed rate twice in the space of a fortnight by up to 0.6 per cent on fixed-rate offers - despite the fall in base rates. Alliance & Leicester followed suit this week with the also hiking rates up twice.

Denise Harvey, mortgage analyst at Moneyfacts, says over the past two weeks lenders have been even more ruthless in withdrawing products from the market and/or tightening their criteria. "Instead of increasing rates or tightening criteria, the smaller building societies such as Bath and Tipton & Coseley have either been withdrawing their products from the market completely or restricting their lending to direct business or local areas," she says.

The recent changes in the mortgage market will affect the 1.4 million people who will come to the end of fixed-term deals this year, and the average homeowner with a £150,000 mortgage will have to pay between £60 and £120 a month extra for a new fixed-term deal.

Are you getting the best deal on your mortgage? Find out how much you could save right now!

Glimmer of hope?

It's not all bad news though - HSBC threw a lifeline to hard-pressed borrowers this week by extending its Rate Matcher mortgage to all UK homeowners. For the next five weeks HSBC will match expiring fixed rates as long as the loan is under £250,000 and 80% or less of the property's value. The arrangement fee the customer pays will depend on the rate and the size of the loan. In general, brokers praised the move with one saying it is 'a breath of fresh air for homeowners'.

If you are set to remortgage this year it make sense to start thinking about it now as some lenders will allow you to reserve a product up to six months in advance. Remortgagers should seek independent advice to help them negotiate their way through the mortgage maze, as with products changing and being withdrawn on an almost daily basis, it needs an expert to work out what the best deals out there are.

Are you looking to remortgage? Maybe to extend your mortgage or just to get a more competitive interest rate?

11 April 2008 © Moneyextra.com

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