Borrowers are no longer as spoilt for choice, when it comes to taking out a mortgage, as they once were - especially at the bottom end of the market. Indeed, new data from money search engine, Moneyfacts, reveals there are 40% less mortgage products available than there were as recently as 3 months ago.
Julia Harris, of Moneyfacts, notes that the mortgage market saw an extremely buoyant start to 2007, both in terms of the number of products to choose from - growing 22% in the first six months, but also as new lenders had recently entered the market and existing players explored new lending areas. But since its peak in July, however, products have been disappearing from the shelves.
Overall, taking account of both prime and sub prime deals, the total number of buy-to-let and residential mortgage products available has fallen 40% in just the last 3 months.
While most of this change can be attributed to the sub prime market, seeing a 72% reduction in the buy-to-let market and a 54% cut in residential deals, the 16% fall in prime residential products is worth noting, says Harris.
The sub-prime market not surprisingly has seen the biggest decline, given the ongoing credit crunch that was started by its counterpart in the US. In general it's the higher risk products, which have been pulled, while many existing products have also seen more conservative limits applied, says Harris.
"Maximum LTVs have fallen, self certification products have seen a decline, and borrowers are now less likely to find a sub prime lender that will accept extra heavy or unlimited adverse credit," adds Harris.
In the Prime market meanwhile, a 16% drop has been seen. Whilst this may not sound much in comparison to the sub prime market, within a historically static market this is certainly unusual and the reasoning much less clear cut. Northern Rock slashing its 230+ product range to just 70 products has certainly played a role, as has the merger of Nationwide BS and Portman BS, adds Harris. The rest can only be attributed to many lenders making more minor changes to their ranges. Some are withdrawing their higher risk products, for example those over 100% LTV or their more specialist deals such as self-cert. Others are simply streamlining their ranges.
Self evidently an overall 40% reduction in products available will mean less choice for borrowers, particularly for those with bad credit, irregular incomes or those looking for high LTV products.
"But equally as worrying," says Harris, "is the fact that lenders seem to be allowing the market to stagnate. Very few new launches are being made, rate changes are slow and there is a discernable lack of innovation. It would appear nobody is prepared to pop their heads over the parapet and make distinctive changes; it's a wait and see game.
