Banks get tough as credit squeeze hits contacts
Banks and building societies have withdrawn 40 per cent of their mortgage deals over the past three months, as the credit crunch takes its toll on people trying to buy a home.
It is the latest sign that lenders are tightening their loan offers in an attempt to recover lost profits following the turmoil in the financial markets.
In total, 5,511 different home loans have been withdrawn since July this year, as many banks and building societies have struggled to borrow money in the wholesale markets.
This has increased their costs - which they pass on to their customers, by withdrawing their best deals or raising rates.
According to independent statisticians Moneyfacts.co.uk, the fall in the number of products on offer is steepest in the subprime sector, as banks and building societies have stopped offering home loans to people with poor credit histories.
But it said the mainstream lending market had not escaped the cull as lenders took a more cautious approach across the board.
Melanie Bien, from mortgage broker Savills Private Finance, said: “It’s not just a problem with subprime or buy-to-let any more. It is beginning to filter through to the mainstream market.
“There is just less choice out there. And with less choice it is tougher for people to find a loan.”
The research from Moneyfacts.co.uk comes just a few days after website MoneyExpert highlighted that one in three home buyers had been rejected for a mortgage in the past six months - a sharp increase on the year before.
The mainstream mortgage market has seen a 16 per cent drop in the number of products available, which Moneyfacts said was unusual in a historically static market.