Page last updated at 12:54 GMT, Friday, 10 October 2008 13:54 UK

Blow for new mortgage borrowers

For Sale signs
First-time buyers are still finding it difficult despite falling prices

The number of mortgage products available to new borrowers hit its lowest figure since the start of the credit crunch, according to Moneyfacts.

On Friday there were 3,281 mortgages available for new borrowers, compared with 10,726 a year ago, the financial information service says.

At the height of the market in July 2007, there were 13,027 offers.

Separately, Abbey confirmed it was not passing on Wednesday's cut in the Bank rate to new tracker deals.

Abbey has confirmed that it is keeping the interest rate on all of its tracker mortgages for new borrowers unchanged, in spite of a half a percentage point cut in the main Bank of England interest rate on Wednesday.

Abbey's existing tracker customers are unaffected as they will automatically have the rate cut passed on.

Abbey and some other lenders had left standard variable rate (SVR) unchanged by Friday.

They include Government-owned Northern Rock and Bradford & Bingley.

Latest move

Abbey blamed wholesale costs for the move on tracker mortgages.

It comes two days after Lloyds TSB - and Cheltenham and Gloucester which it owns - said it would only give new tracker mortgages to customers with at least a 25% deposit. Previously only a 10% deposit was needed.

Borrowers are advised to check with their mortgage lender what rate they will pay once their current deal expires
Mortgage broker Aaron Strutt

These moves will disappoint potential new borrowers who had been hoping to see the cost of home loans drop after the Bank of England's shock cut in the Bank rate by half a percentage point to 4.5%.

Ten lenders including Halifax, Lloyds TSB, the Woolwich, First Direct, Royal Bank of Scotland and NatWest all said they were reducing their SVR shortly after the cut.

Relatively few mortgage holders have their repayments based on the SVR.

But some end up on the SVR when their cheaper fixed-rate deal runs out.

Warning

Some borrowers coming to the end of their deals are finding their repayments rising with an interest rate of as much as 10%, according to Aaron Strutt, of Chase de Vere Mortgage Management.

This was because some deals, rather than reverting to the SVR, instead go to a margin above Libor - the rate at which banks lend to each other.

The three-month Libor lending rate has been rising and stood on Friday at 6.285%, significantly higher than the Bank rate of 4.5%. Before the credit crunch the difference between these two rates was much smaller.

"Borrowers are advised to check with their mortgage lender what rate they will pay once their current deal expires," said Mr Strutt.

He added that many providers previously offering these Libor-linked deals are no longer lending but had concentrated on buy-to-let, self-certification and sub-prime mortgages.

Darren Cook of Moneyfacts said the squeeze in the availability of mortgages was the result of the demise of deals for people offering a deposit of just 5% or 10%.

Banks were unwilling to take on the risk, he said.

"Choice may be reducing, but there are still enough products out there for borrowers to try and find a suitable deal that suits individual circumstances," he said.

"The difficulties lie in the lack of liquidity within the market and providers having no appetite or being unable to lend on a larger scale.

"In essence, the price list shows that mortgages are getting a little cheaper, but the stock rooms are currently nearly empty."




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