Mortgage brokers 'act fast' tip

Estate agents could ask more questions about buyers' finances

People who decide on a new mortgage should act fast in the current climate as lenders swiftly change deals on offer, a number of brokers say.

Lenders are being careful to spread their custom across different mortgage products and are taking more care over who they lend to.

It means competitive deals are being pulled at short notice and criteria are changing quickly, brokers add.

They add that the situation has been gathering momentum since the new year.

More than a million fixed-rate deals, typically lasting for two years, are due to expire in 2008.

But banks, who increasingly lack access to money markets to fund additional mortgages, are issuing fewer mortgages than last year.

Repayment worries

One in 20 of those on fixed rates say they have no idea how they will meet repayments when their current deal expires, according to a new survey by body Mortgage Monitor.

The poll said 4% of people with fixed rate deals said that concerns over finances had affected their performance at work and 5% had become physically ill.

People looking to buy a home also face more questions from estate agents wanting to be certain they can finance the property they are buying.

Those who do not have the ability to give a large deposit are also finding that fewer deals are on offer.

Lenders' caution

A lack of confidence in mortgage-backed investments, as a result of the sub-prime mortgage crisis, has trickled down and means lenders are being more cautious.

Mortgages in numbers 14 - number of lenders offering 100% mortgages 88% - average loan-to-value level in January 41 - number of lenders who have cut their maximum loan since the start of December

David Hollingworth, of London and Country Mortgages, said: "They are being much more careful about who they are lending to and how much business they take."

He said that competitive deals were still available, but fears of having "all their eggs in one basket" meant these deals were being pulled at short notice when they became popular.

Ray Boulger, of John Charcol, said the 100% plus mortgage market all but disappeared within four days recently, as lenders did not want to be the "last man standing".

He said anyone coming to the end of a deal should plan ahead by finding out what new deal their current lender was offering. They should also use an independent advisor to get a taste of how the market had changed.

State of the market

Mortgages greater than the value of a property have disappeared almost completely.

The Bank of England is expected to cut interest rates further in 2008

According to the financial information service Moneyfacts, there are now only 14 lenders prepared to offer a 100% mortgage, compared to 33 in December.

But many other lenders have been quietly raising the minimum deposit they require, which is a particular hindrance to first-time buyers.

Since the beginning of December, 41 lenders - ranging from some of the biggest UK banks to relative minnows - have reduced the size of the maximum loan they are prepared to make.

Many of these now demand a deposit of at least 10% from a borrower whereas before they might well have been prepared to lend 95% or even more of a property's value.

New loans falling

Among the big lenders which have reined in their lending this way have been the Alliance and Leicester, the Britannia building society, Co-op bank, Northern Rock, Cheltenham and Gloucester (the mortgage lending arm of Lloyds TSB) and most recently the Bradford and Bingley.

And some smaller lenders, such as local building societies, are equally cautious, now lending at just 65% or 75% LTV.

Under such circumstances it is not surprising that the volume of mortgage lending is slumping.

Last week the Council of Mortgage Lenders (CML) said new loans for home buyers fell to their lowest level for nine years in January, to just 50,300.

Hand in hand with this, the average LTV fell for the first time since early 2005, from 90% to 88%.

The biggest lenders are still prepared to lend at 95% LTV though, among them the Halifax, Woolwich, Abbey and the Nationwide.