Halifax restricts new mortgages

The Halifax announces its new lending restriction

The Halifax, the UK's biggest mortgage lender, will stop offering home loans on its standard variable interest rate (SVR) to new customers from 3 May.

They will have to take out fixed or tracker rate deals which have set-up charges, and penalties for being redeemed early.

The Halifax said too many people were applying for its SVR mortgage, but with no intention of staying with the bank.

It said it faced losing money due to the administrative costs involved.

The Halifax's SVR mortgage, currently carrying an interest rate of 7% on loans of up to 95% of a property's value, has no early redemption fee and no set up charge.

A spokeswoman for the bank said that under the circumstances it had no alternative.

"We are seeing a significant number of new customers but they are looking to stay for just a short time," she said.

"Anyone coming off a special deal with Halifax will revert to SVR as usual," she added.

'Major move'

The change is the latest tightening of the mortgage market in the wake of the credit crunch afflicting the banking industry.

I think for the largest lender in the country to say they will not allow applications for their SVR is a very major move Ray Boulger, John Charcol

There has been a sharp reduction in the volume of funds that can be lent to new borrowers.

So lenders have been restricting the availability of mortgage money by demanding larger deposits and raising the interest rates they charge to new customers who take fixed and tracker rate deals.

The knock-on effect is that some people are moving their mortgage deals to the simplest and cheapest SVR deal they can find, with the intention of moving their loan as soon as possible once they can find a more attractive offer elsewhere.

"I think for the largest lender in the country to say they will not allow applications for their SVR is a very major move," said Ray Boulger of the mortgage brokers John Charcol.

By contrast to its SVR mortgage, most of the Halifax's range of fixed or tracker rate mortgages have set-up charges ranging from £499 to £999 and penalty charges for leaving the deal early.

A week ago the Halifax announced higher charges for these deals too, when taken by new customers.

The Halifax is not the only lender to have restricted its standard SVR offer.

The Nationwide has done so for SVR mortgage applications generated by mortgage brokers.