BoE warns on mortgage rush as Co-op Bank pulls best deals
By Emma Thelwell
Last Updated: 2:40pm BST 03/04/2008
The Bank of England has warned that banks will withdraw more mortgage deals in the coming months, as the Co-op Bank today become the latest lender to pull the plug on its best deals.
In its quarterly survey of credit conditions, the central bank reported that banks have said they plan a "slightly larger" reduction in mortgages in the next three months than we have seen so far this year.
The news came as the Co-op announced that its whole range of 2-year fixed rate products will no longer be available from close of play today.
John Barker, head of mortgages at The Co-op, said: "We have recently provided a range of very competitive mortgage deals, which have included a number of 'best buy' two-year mortgages.
"This has led to unprecedented levels of customer interest and demand, which has been fuelled further by the recent actions of other lenders to reprice and withdraw their products." (AtW's translation: "we have run out of risky budget and don't want desperate people to have our money")
Indeed, since the beginning of March, 2,932 deals have been taken off the market, according to financial information group Moneyfacts.co.uk, leaving just 4,794 deals left.
First Direct, HSBC's internet bank, pulled out of new lending completely on Tuesday. One of the country's top 20 mortgage providers, it gave only five hours notice that it was closing to new business.
Katie Tucker, of mortgage broker Charcol, said: "There is almost no notice of product closures, as lenders are reacting to the domino effect: others pack up shop, they suddenly find themselves market leading and have to pull down their shutters quick-smart."
This means borrowers are being caught out by hesitation, even, for just one day, she added. If the next best choice is 0.4pc higher, for example, hesitating could cost a customer with a £200,000 mortgage as much as £800 a year.
The Co-op has said that the withdrawal of 2-year deals is a "temporary" measure, and that it will continue to offer a range of competitive 3, 5,10 and 25-year mortgages to both new and existing customers.
Mr Barker said: "These products will be developed further, as they fit strongly with our strategy of creating long-term customer relationships."
As the credit squeeze makes it increasingly difficult for lenders to raise finance, the mortgage market is widely expected to tighten even further as lenders who have not re-priced become overwhelmed by demand.
Three-month Libor - the benchmark rate at which banks lend to each other - closed last night at 6pc - some three-quarters of a percent above the base rate. Ms Tucker said: "This forces any lender with a half decent rate to price their trackers high to avoid the stampede of new borrowers looking for the best deal."
---
What should have happened 5-7 years ago is creation of a few legal limits on how much can be borrowed to buy a house (min 25% deposit, max 3-4 times NET salary), also complete ban on "teaser" low interest rates for 2-3 years, no interest-only morgages - maximum length of morgage should have been fixed (you can repay faster, but not slower), say 15-20 years.
If this was in place this country would not have had a property bubble.
By Emma Thelwell
Last Updated: 2:40pm BST 03/04/2008
The Bank of England has warned that banks will withdraw more mortgage deals in the coming months, as the Co-op Bank today become the latest lender to pull the plug on its best deals.
In its quarterly survey of credit conditions, the central bank reported that banks have said they plan a "slightly larger" reduction in mortgages in the next three months than we have seen so far this year.
The news came as the Co-op announced that its whole range of 2-year fixed rate products will no longer be available from close of play today.
John Barker, head of mortgages at The Co-op, said: "We have recently provided a range of very competitive mortgage deals, which have included a number of 'best buy' two-year mortgages.
"This has led to unprecedented levels of customer interest and demand, which has been fuelled further by the recent actions of other lenders to reprice and withdraw their products." (AtW's translation: "we have run out of risky budget and don't want desperate people to have our money")
Indeed, since the beginning of March, 2,932 deals have been taken off the market, according to financial information group Moneyfacts.co.uk, leaving just 4,794 deals left.
First Direct, HSBC's internet bank, pulled out of new lending completely on Tuesday. One of the country's top 20 mortgage providers, it gave only five hours notice that it was closing to new business.
Katie Tucker, of mortgage broker Charcol, said: "There is almost no notice of product closures, as lenders are reacting to the domino effect: others pack up shop, they suddenly find themselves market leading and have to pull down their shutters quick-smart."
This means borrowers are being caught out by hesitation, even, for just one day, she added. If the next best choice is 0.4pc higher, for example, hesitating could cost a customer with a £200,000 mortgage as much as £800 a year.
The Co-op has said that the withdrawal of 2-year deals is a "temporary" measure, and that it will continue to offer a range of competitive 3, 5,10 and 25-year mortgages to both new and existing customers.
Mr Barker said: "These products will be developed further, as they fit strongly with our strategy of creating long-term customer relationships."
As the credit squeeze makes it increasingly difficult for lenders to raise finance, the mortgage market is widely expected to tighten even further as lenders who have not re-priced become overwhelmed by demand.
Three-month Libor - the benchmark rate at which banks lend to each other - closed last night at 6pc - some three-quarters of a percent above the base rate. Ms Tucker said: "This forces any lender with a half decent rate to price their trackers high to avoid the stampede of new borrowers looking for the best deal."
---
What should have happened 5-7 years ago is creation of a few legal limits on how much can be borrowed to buy a house (min 25% deposit, max 3-4 times NET salary), also complete ban on "teaser" low interest rates for 2-3 years, no interest-only morgages - maximum length of morgage should have been fixed (you can repay faster, but not slower), say 15-20 years.
If this was in place this country would not have had a property bubble.
. You dont want be remortgaging at the moment the deals out there are cr*p
vermin
Comment