The standard factors which usually determine the rates at which mortgage rates are set, including bank base rate, swap rates and Libor rates are all much lower than this time last year, yet the rates on offer are much higher.
Michelle Slade, analyst at Moneyfacts.co.uk, commented: “As house prices continue to fall and the risk of default increases, the lenders are pricing more for risk and as a result these standard factors are not quite as influential on the rates as they once were.
“There does not appear to be a single aspect of the mortgage market that has not been unfavourably hit.”
Moneyfacts shows that this month there are 3,748 products available, compared with 13,027 this time last year; 0 100% plus mortgage lenders, compared with 11 last year; 2 100% lenders (33); 21 self cert lenders (44); 73 lenders offering interest only (86); and 13 sub prime lenders (37).
“Over time the mortgage market should continue to improve from its current position,” said Slade. “The number of products will steadily increase and rates will lower with increased competition between lenders. However, it will be a while before lenders regain a healthy appetite to lend with the maximum LTVs on offer largely determined by the future decline in property values.
“In the last month numerous lenders have cut rates, so borrowers looking for a new deal can take some comfort from the fact that the situation is steadily recovering.”
