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Borrowers face a narrowing mortgage market
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First Direct Prompts Further Mortgage Withdrawals
Writes Dan Drage dan.drage@consumerchoices.co.uk
A glut of high street lenders have followed First Direct and withdrawn their most competitive mortgage products.
First Direct (www.firstdirect.com), the internet and phone banking arm of HSBC, temporarily withdrew its mortgage deals to new applicants yesterday amid unprecedented demand for their low interest products.
Now the Co-Operative Bank (www.co-operativebank.co.uk) have followed suit, withdrawing their two year mortgage deals from the open market.
US investment bank Lehman Brothers has additionally taken the decision to remove itself from the UK mortgage market. Two products, the Southern Pacific and Preferred mortgages, will be withdrawn at 6pm today.
The range of mortgage products on offer have fallen by 20% over the last seven days, with the trend set to continue throughout the month. Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.
Facing a flat mortgage market with stringent acceptance criteria, borrowers are turning to credit cards for assistance. Leading financial analysts believe property buyers are loading up credit cards with deposits and mortgage payments.
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"Borrowers have no choice unless they win the Lottery or sell up and start renting"
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Philippa Gee, investments director of the financial advisers Torquil Clark, suggests that for many, borrowing on credit cards is a question of necessity rather than choice:
‘People are being forced down this route; they have no choice unless they win the Lottery or sell up and start renting.’
Chris Eagle, Commercial Manager at Credit Choices, urges those taking the credit card direction to choose their product carefully:
‘When choosing a credit card, you may think the most important aspect is the APR, but this is not always the case. The terms and conditions are invariably the area that you should focus on first; make sure there are no hidden clauses to catch you out.'
He continues:
'Make the most of an extended 0% balance transfer offer if you can, and beware of cards that offer both 0% on balance transfers and 0% on purchases. Ideally, you don’t want to be saddling yourself with extra debt while trying to clear an existing balance.'
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