Monthly Mortgage Review – what’s new, what’s gone, and what’s hot?

What’s new?
New mortgage products worth raving about are thin on the ground this month.  As the market further feels the effects of the credit crunch, mortgages are becoming more difficult to obtain at affordable rates and flexible terms, particularly for borrowers looking to buy property for the first time.  The two products worth mentioning here are reflective of the current state of consumer lending and have further implications for the mortgage market as a whole; namely they are indicative of an expansion of the sub-prime market in the coming months as more consumers find themselves pushed into the sub-prime market as household finances are further squeezed and lenders reassess their lending criteria.

Chelsea Building Society has expanded its sub-prime mortgage product range with the introduction of two new fixed rate products designed for borrowers with impaired credit ratings:
1). The Prospect Adverse 2 Year Fixed Rate Mortgage offers the introductory rate of 6.59% until 1st April 2010 (overall cost for comparison 7.6% APR); maximum LTV of 90% and an arrangement fee of £995.  Applicants with CCJs and one missed mortgage payment in the last 6-12 months considered.
2). The Prospect Adverse Plus 2 Year Fixed Rate Mortgage offers the introductory rate of 6.79% until 1st April 2010 (overall cost for comparison 7.8% APR); maximum LTV of 85% and arrangement fee of £995.  Applicants with one missed mortgage payment in the last 6 months or two in the last 12 months considered.

What’s gone?
The most notable changes to the mortgage market this month with regards to withdrawn products point to growing evidence that the 100% mortgage market is disappearing before our eyes.  Products of this type are becoming more and more difficult to find, and mortgage options that offer loan to value ratios of higher than 100% have all but vanished.  Ten lenders including Abbey, Alliance and Leicester, Scottish Widows, RBS IP Royal Bank of Scotland, Mortgage Express, Bradford and Bingley, BM Solutions, Coventry BS, Godiva Mortgages and Northern Rock* have all withdrawn mortgage products of this type over the last few weeks.  Other lenders including Beverly BS, Coventry BS and Dudley BS reduced their maximum LTV ratios by around 5-6% each.  The clamping down on these products, traditionally popular with first time buyers, shows the increasing pressure on those looking to enter the property market without a deposit, as lenders look to reduce their risk and maximize profits.

What’s hot?
One of the best mortgage products available at the moment is Market Harborough BS 2 year fixed rate product.  Offering a 2 year fixed rate of 4.25% (overall cost for comparison 6.9% APR) for loans of up to £500 000 (maximum LTV 75%), this product is well suited to those customers looking for the financial stability of affordable fixed monthly repayments.  Early repayment charge within 5 years and arrangement fee of £595 apply.  Although interest rates have been falling over the last couple of months, fixed rate products should not be discounted by borrowers, as many lenders are not passing on falls in the base rate to their customers on variable products in an effort to rebuild margins after the sub-prime mortgage lending crisis in the US.  Moneyfacts.co.uk lists 24 lenders who have failed to pass on discounts since the first rate drop in December, including Yorkshire BS, Accord Mortgages, RBS IP Natwest, and RBS IP Royal Bank of Scotland.  Speak to an independent mortgage advisor about these and other deals available for your requirements.

*moneyfacts.co.uk data

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