Responding to the mass mortgage withdrawal
There is likely to be mounting concern among young professionals that the choice of mortgages for professionals available to them is dwindling fast.
For those keen on getting on the property ladder, some of whom may have saved for years for a deposit, the recent revelation that as many as 2,000 mortgage products were removed from the market in March alone will only add to their frustrations.
Less mortgages mean less choice and hence less competition, which analysts expect will only exacerbate the affordability problems that many already face. So how can borrowers respond?
It's not the size, it's what you do with it…
There is a catch-22 to this conundrum. The latest casualty, First Direct, which announced on April 2nd that it has stopped lending altogether, has attributed its withdrawal to a need to clear its backlog, having received five times the normal number of mortgage applications.
Northern Rock, once the UK's fifth largest mortgage lender, has also announced that it is to curtail new lending and concentrate on savings.
The situation is so bad that of the top 250 mortgages on the market, only 27 per cent are offered by the top ten mortgage lenders, according to Moneyfacts.co.uk.
But it in the current credit crunch scenario, the 'bigger is better' tenet really does not apply, with borrowers likely to get the best deals with smaller lenders such as building societies.
Louise Cuming, head of mortgage services at moneysupermarket.com, explains: "If you look at the best buys at the moment we’ve got members there like the Melton Mowbray Building Society, The Kent Reliance Building society, The Cheshire Building Society, which are very tiny compared to the HBOS's of this world."
However, Ms Cuming adds that because of their size, many will only be able to lend for a limited number of time before they suffer the same fate of being inundated with applications beyond their capability.
This view is supported by Julia Harris of Moneyfacts.co.uk, who insists that small lenders "simply can't cope" with the number of mortgage applications.
She told the Times: "Unfortunately these lenders are the ones least likely to cope with the flood of applicants, so these best-buys may not be around for long."
Beyond the best deals
There are of course less conventional options.
For example, despite announcing the withdrawal of its two-year fixed rate products, the Co-operative Bank's head of mortgages, John Barker, highlighted the bank's focus on long-term deals and developing long-term customer relationships.
But what differentiates the lender from other major banks is that it funds its mortgages like many building societies - that is on customer deposits alone. Its ability to sustain lending - unlike smaller lenders - and avoid the interbank financing difficulties faced by larger banks, make it an attractive option for customers.
Conversely young professionals whose wages are likely to rise significantly in the future - such as trainee doctors, dentists, engineers and recent graduates - there are always interest-only mortgages.
Although this means succumbing to the interest rate, analysts such as Alexander Hall's chief operations manager Andy Pratt suggests that the ability to control mortgage payments - through bulk pay-offs at the borrower's convenience - make it an excellent option for those with limited funds.
In either case, a focus on the long-term commitment to mortgages is certainly a safer strategy than succumbing to the short-term panic that has set in among lenders during the current climate.
Mortgages for Professionals is a specialist mortgage broker offering a whole-of-market choice of all UK lenders. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
For those keen on getting on the property ladder, some of whom may have saved for years for a deposit, the recent revelation that as many as 2,000 mortgage products were removed from the market in March alone will only add to their frustrations.
Less mortgages mean less choice and hence less competition, which analysts expect will only exacerbate the affordability problems that many already face. So how can borrowers respond?
It's not the size, it's what you do with it…
There is a catch-22 to this conundrum. The latest casualty, First Direct, which announced on April 2nd that it has stopped lending altogether, has attributed its withdrawal to a need to clear its backlog, having received five times the normal number of mortgage applications.
Northern Rock, once the UK's fifth largest mortgage lender, has also announced that it is to curtail new lending and concentrate on savings.
The situation is so bad that of the top 250 mortgages on the market, only 27 per cent are offered by the top ten mortgage lenders, according to Moneyfacts.co.uk.
But it in the current credit crunch scenario, the 'bigger is better' tenet really does not apply, with borrowers likely to get the best deals with smaller lenders such as building societies.
Louise Cuming, head of mortgage services at moneysupermarket.com, explains: "If you look at the best buys at the moment we’ve got members there like the Melton Mowbray Building Society, The Kent Reliance Building society, The Cheshire Building Society, which are very tiny compared to the HBOS's of this world."
However, Ms Cuming adds that because of their size, many will only be able to lend for a limited number of time before they suffer the same fate of being inundated with applications beyond their capability.
This view is supported by Julia Harris of Moneyfacts.co.uk, who insists that small lenders "simply can't cope" with the number of mortgage applications.
She told the Times: "Unfortunately these lenders are the ones least likely to cope with the flood of applicants, so these best-buys may not be around for long."
Beyond the best deals
There are of course less conventional options.
For example, despite announcing the withdrawal of its two-year fixed rate products, the Co-operative Bank's head of mortgages, John Barker, highlighted the bank's focus on long-term deals and developing long-term customer relationships.
But what differentiates the lender from other major banks is that it funds its mortgages like many building societies - that is on customer deposits alone. Its ability to sustain lending - unlike smaller lenders - and avoid the interbank financing difficulties faced by larger banks, make it an attractive option for customers.
Conversely young professionals whose wages are likely to rise significantly in the future - such as trainee doctors, dentists, engineers and recent graduates - there are always interest-only mortgages.
Although this means succumbing to the interest rate, analysts such as Alexander Hall's chief operations manager Andy Pratt suggests that the ability to control mortgage payments - through bulk pay-offs at the borrower's convenience - make it an excellent option for those with limited funds.
In either case, a focus on the long-term commitment to mortgages is certainly a safer strategy than succumbing to the short-term panic that has set in among lenders during the current climate.
Mortgages for Professionals is a specialist mortgage broker offering a whole-of-market choice of all UK lenders. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
