Mortgage crack-down makes itself felt

Each month I put together a short summary of the best mortgage products currently available from UK mortgage lenders.  After reviewing this month’s best-buys, I am taken aback by how noticeably the trickle-down effect of international market turmoil is revealing itself.  The mortgage market is visibly shrinking.  Over the past two weeks three of the UK’s biggest mortgage players, Nationwide, NatWest and the Norwich & Peterborough Building Society all raised their interest rates to deter new borrowing.  Meanwhile, First Direct closed the door on new lending as a temporary measure to stem the tidal wave of new applications being caused by fewer avenues of mortgage credit being available elsewhere as lenders across the board tighten their belts.

With UK banks having less money to lend, it is understandable that they are much more careful of who to lend to following the lending free-for-all of the past decade when credit was available cheaply to, basically, whoever wanted it.  What is worrying is that the effects of this are no longer just words written in the financial pages, they are making themselves felt in my pocket, and probably yours too. 

In March, the TotallyMoney products worth considering included:

1. Market Harborough 2-year fixed rate mortgage at 4.25% (cost for comparison 6.9%)
2. First Direct Life Tracker mortgage – base rate plus 0.34% for life (CFC 5.8%)
3. Norwich & Peterborough 2-year fixed rate at 4.69% (CFC 7.0%)

This month, both Market Harborough and First Direct are missing from the list altogether, having withdrawn their competitive products; and Norwich & Peterborough BS have added 0.25% to their 2-year fixed rate product, increasing the headline rate to 4.94%.  A quarter of a percent interest rate increase might not seem like much, but the difference between borrowing £250,000 at 4.69% and 4.94% over 25 years adds up to difference of over £10,000 in total interest repayments.

In the current financial climate it is very important to speak to an independent advisor regarding your mortgage options before applying.  As lenders tighten their lending criteria, you may be surprised to find you are no longer considered to be in the realm of low-risk borrowers.  An impartial mortgage advisor will have knowledge of the whole market, and will also have access to exclusive discounts and specials.  It’s worth investigating all avenues in order to find the best product at the best price.

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