Mortgage products cut by 40%

According to Moneyfacts, the financial information website, tighter lending criteria and a rise in interest rates has led to a 40% decrease in the range of mortgages available to those seeking to buy a home or remortgage.

In the first half of 2007, the number of home loans on offer increased by 22% but since July, product choice has reduced dramatically for both high and low-risk borrowers.

Sub-prime borrowers have been badly affected, with over half of the products on offer being withdrawn.

The Moneyfacts data shows that 4,000 sub-prime mortgage products for owner-occupiers have been dropped along with 1,000 sub-prime loans for buy-to-let investors.

In addition, loan-to-value ratios have decreased in the sub-prime sector.

For mainstream borrowers, there are 438 fewer buy-to-let loans on offer, representing a 20% reduction in choice; 16% of residential mortgages have also been discontinued.

The figures reflects both Northern Rock’s decision to reduce its product range from over 230 to just 70 and also this year’s merger of Nationwide and Portman building societies.

However, Ray Boulger, senior technical manager at John Charcol, the mortgage broker, points out that despite a fall in the number of mortgages on offer, borrowers with good credit histories are not having difficulties finding loans.

At the same time, those with mortgages and seriously bad credit histories may now find they are unable to remortgage, or are forced are to pay rates 5% above the Bank of England base rate, which currently stands at 5.75%.

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