Mortgage products back up to pre-banking crisis levels... as long as you have a big deposit

Published 23rd Sep 2011

The number of mortgage products available to prime residential borrowers has increased to over 3,000 – the highest level since the credit crunch flayed chunks off the loans market in 2008.

There are now 3,035 mortgages on offer, closing in on the 3,250 available in February 2008, research by Moneyfacts.co.uk has revealed.

By the peak of the banking crisis in April 2009, the number of mortgage deals had plummeted to just over 1,000 - a cataclysmic drop in just over 12 months.

Now little over two years later, the number of mortgages on the market has nearly tripled in a welcome sign of increasing competition.

However, while the number of mortgages may be at a similar level to a few years ago, the market remains fragile and experts point out that borrowers are living in a completely different landscape to 2008.

Back then, customers with a 10 per cent deposit or less still had their pick of the majority of mortgages on the market.

This is no longer the case, as customers with such small deposits have seen the number of mortgages available drop to about a quarter of peak levels.

Michelle Slade, spokesperson for Moneyfacts, says: ‘By increasing the number of mortgages, lenders are showing that they are open for business.

'Rising product numbers bring more competition, which has brought more keenly priced mortgage deals to the market.

'Lenders are becoming more accommodating with their lending criteria, which bodes well for increasing the competitiveness in the mortgage market.'

In a sign of increasing mortgage product competition, This is Money revealed two weeks ago that Aldermore Bank launched a 100 per cent mortgage which will allow homebuyers to borrow the full amount of a property’s value, without putting down a cash deposit.

It is the first lender to offer a new mortgage at 100 per cent since the widespread withdrawal of these high loan-to-value (LTV) deals during the financial crisis.

And one of the most prolific providers of high LTV mortgages during the property boom, bailed-out bank Northern Rock, recently launched a range of loans with a 10 per cent deposit aimed at first-time buyers.

David Hollingworth, mortgage expert at London and Country, said: ‘It’s an encouraging sign – much improved and increased competition means better rates as lenders aim to get to the top of the best-buys.

‘But it is important to remember we are in a market which is still pretty constrained. Naturally, more products mean a range of products, such as two-year fixes, 60, 75 and 85 per cent mortgages.

‘The key is competition, and this filtering through to better LTV deals. It is a gradual process and we’ll see which niches lenders get into and what risk profiles they are ready to share.’

Michelle Slade added: ‘Average mortgage rates have fallen to all-time lows, while at the same time deposit requirements are easing.

‘First time buyers are finally being given some options as the number of deals available to borrowers with a 10 per cent deposit or less continues to grow.

‘Recent lending figures show that while the number of mortgages being approved is rising, we are still a long way off the levels seen in previous years.’

Source: ' ThisIsMoney '

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