Mortgage availability drops to a 10-year low as half of the credit is withdrawn from the market


Home buyers have halved their mortgage options in the past 12 months, with the number of available credit falling to a 10-year low.

The availability of mortgages has decreased drastically since the beginning of the coronavirus crisis and, according to industry analysts Moneyfacts, there are now 2,259 loans on the market. This is a decrease of 54 percent compared to last October when 4,955 offers were available.

Home loan numbers have declined for four months in a row and are now at their lowest level since May 2010, when the mortgage market recovered from the financial crash.

Small deposit mortgages have all but vanished as banks limit their lending to customers they deem to be less risky. Most banks will stop lending to borrowers with a deposit of less than 15 percent. Only 51 mortgages are available to borrowers with a 10 percent deposit, and many of them are limited to home loan and savings customers buying in their area.

In addition to the limited choice, borrowers have seen mortgage rates rise for a third straight month, Moneyfacts found.

The average two-year fixed rate loan now has an interest rate of 2.38 percent, well above the June average of 2.02 percent. The 5-year fixes rose from 2.26 to 2.62 percent over the same period.

A separate report released by the Financial Conduct Authority, the City Watchdog, said the current disruption in the mortgage market was akin to the recent recession.

The regulator said the market’s decline and recovery had been much faster than before, but warned that it could be due to the backlog caused by the spring lockdown.

Moneyfacts’ Eleanor Williams said the stamp tax break had also contributed to buoyant activity in the mortgage market, despite rising interest rates and lower availability. She said more than 150 mortgages went missing in the last month alone.

“The specter of negative stocks should house prices fall from current levels that responsible lenders are happy to moderate but have no control over,” said Williams.

“Similarly, uncertainty about future levels of employment and income as government support programs are phased out is another factor that lenders may consider.”

In addition to prospective buyers, homeowners who are highly indebted also suffered from the pandemic. Another study by Experian, the credit bureau, found that those who requested payment breaks had 30 percent more home debt than those who got through the crisis without assistance.

About half of the people who have requested a payment break from their bank have suffered a loss of income, the company said.

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