2000 available mortgages, yet I can't find one!
The number of mortgages in the market may have rocketed past 2000, but there's still a crippling lack of choice
At the height of the housing boom, buyers could choose from an astonishing 10,000-plus mortgages, all with different rates, charges, terms and criteria. There was a mortgage for everybody, including plenty of people who should never have had a mortgage in the first place.
The credit crunch changed that. In April last year, the number of mortgages hit a low of “just” 1,209. Now, though, things are looking much brighter, according to new research from Moneyfacts.
You can now choose from more than 2,053 products, up 70% from last year’s low.
Given this large number of deals, many borrowers will be asking themselves this question: If there are so many mortgages out there, why is it so difficult to get one?
There are nine million bicycles in Beijing...
That figure of more than 2,000 mortgages gives a false illusion of choice. Many are variations on a theme, for example, the same lender may have a trio of two-year fixed rate deals, each with slightly different arrangement fees. They may also have three and five-year fixes, also with different fees. So that’s nine already, and you might not qualify for (or want) any of them.
Others have strict lending criteria, sky-high rates, hefty arrangement fees, or aren’t available to anybody wanting to borrow more than 75% loan-to-value (LTV).
This is causing massive problems for first-time buyers, who often need a princely deposit just to buy a pauper’s hovel, and existing homeowners with high LTVs, who may be trapped on standard variable rates charging five or six times base rate.
Things are getting better, but only slightly.
... but just two thousand mortgages in the UK
There may be 2,000 mortgages on the market, but a paltry 13 stretch to 95% LTV. And even this is an illusion, because most are restricted to people who get financial help from their parents.
Related goal
Sell your home
If you want to obtain the best possible price when selling your home, then these ideas should help.
Do this goalLloyds TSB’s first-time buyer Lend a Hand mortgage range includes a reasonably-priced three-year fix at 4.99%, with an £895 arrangement fee. You only need a 5% cash deposit, but your “helper” needs savings equal to 20% of the property’s value. It’s not a bad deal, but it looks suspiciously like a 75% mortgage to me.
Other lenders, including Bath building society, offer 95% LTV mortgages with similar restrictions. Arguably, the only pure 95% deal is a first-time buyer deal from Yorkshire Bank, a three-year fixed rate mortgage charging 6.99% with a £599 fee. Full marks for trying to help first-time buyers, but this is nearly 14 times base rate.
Nationwide does offer 95% deals, but only to existing borrowers.
-
Adopt this goal: Sell your home
Better, but not a lot
You have a wider choice up to 90% LTV, with 152 mortgages on offer, up from 71 a year ago. But when you scrape away all the “me-too” and “not-you” deals, again, the choice isn’t so great.
3 easy ways to reduce how much you spend
Nationwide offers a two-year fix up to 90% LTV at 5.98%, with a £396 reservation fee and £99 booking fee. This is only available to customers who have the society’s FlexAccount as their main current account, and pay in £750 a month. And the rate is still 12 times base.
HSBC offers a lifetime variable rate at 4.99% up to 90%, with no arrangement fee. This is a good deal, but at 4.49% over base it ain’t cheap. If base rates rose to, say, 2%, it would start to look pricey at 6.49%, and if they rose even higher...
Things do start to look better at 80% LTV, where NatWest offers a tracker mortgage until May 2012 charging 2.99%, with a £999 fee.
-
Watch this video: Cut the cost of your mortgage!
Equity rules OK!
What you really need right now is 25% deposit or equity. If you’ve got that, you can claim some of the best mortgage rates in history.
First Direct offers a two-year fix up to 75% LTV for just 3.29%, with a £499 booking fee and £499 arrangement fees. The One Account has a variable rate at 3.75% up to 75% LTV, with no arrangement fee
If you are borrowing just 65% of your property’s value, things get even better. First Direct offers a paltry 2.39%, with a £499 arrangement fee.
There may be more than 2,000 mortgages out there, but that figure means nothing to anybody borrowing more than 75% of their property’s value.
The good news is that rates are getting slightly more generous up to, say, 80% or even 85%, and choice should gradually expand up to 90%, but there is still a long, long way to go.
More: The evil way Foxtons ripped off landlords | Make money from falling house prices!
Comments
-
Don't forget that first time buyers with earning potential (ie graduates) have already been forced into debt to complete their education, which again makes it much harder to get a mortgage at a reasonable rate. It's very judgemental to say that some people shouldn't have a mortgage at all - even someone on a very low income can manage a mortgage at the right rate and duration for them.
REPORT This comment has been reported. -
@ash007 - Agreed, life ain't fair. But please remember, people do not always get themselves into financial difficulty through their own fault, and the same is true of people who don't have huge deposits in order to mortagage/re-mortgage. I moved last year, selling and buying at a very similar price level, in order to maintain my employment. I had little choice. When my house went on the market, I had at least 45% equity, but in the year it took to sell, the market had crashed to such an extent in the area that by the time I sold, i could only scrape together 10-15% of a deposit on the new property with the help of family. Suddenly, my portable mortgage (which wasn't that great) wasn't portable any more because I no longer had the required 25% for the product. Suddenly, I am a high risk, and can choose from very few, very expensive mortgages - and to add insult to injury was forced to pay £5k early repayment charges to get out of the deal with the original mortgage co - even though it wasn't my choice to do so. So although I agree that we should be prudent in our borrowing, and the days of 95-125% mortgages as standard should be over, many people who always have been prudent are caught up in this mess through unemployment/other circumstances beyond their control, and perhaps its time to cut us a little slack?
REPORT This comment has been reported. -
ash007 - I completely agree with your sentiments. The banks should not go back to their old ways of lending money to whoever asked, regardless of their circumstances. However, it is a little unrealistic to suggest that a first time buyer is in a position to afford a 25% deposit on their first home. That would be nearly £40,000 on even a modest £150,000 home. Then add to that stamp duty and legal fees, not to mention the huge mortgage arrangement fees that are now being charged. I think there needs to be a little more help for the first time buyers out there - they are after all the life blood of the property ladder.
REPORT This comment has been reported.
Do you want to comment on this article? You need to be signed in for this feature
25 March 2010