Julia Harris, analyst at Moneyfacts.co.uk said: “Just over six weeks ago Moneyfacts’ research revealed a 40 per cent overall drop in the number of residential and buy-to-let products available since the market peaked in July.
"Since then, the prime markets have shown signs of recovery, with increased activity from providers and signs of innovation returning. In fact we have seen a 10 per cent rise in the number of prime residential products available since October.
“On the other hand the sub prime market has continued to take a battering. Since our last report in October, a further 20 per cent of sub prime residential products have been withdrawn and a staggering further 62 per cent of sub prime buy-to-let deals have disappeared, taking the overall total reductions since July to 63 per cent and 89 per cent respectively.
“Not only have providers withdrawn significant amounts of products, rates have been hiked and criteria significantly tightened. It seems that the only way for the sub prime market to survive is for lenders to take a radical look at their approach to the market.
“With the sub prime buy-to-let market already virtually destroyed, it surely cannot sustain much more pressure before it vanishes. The next few months will be interesting to watch. In less than a year the sub prime market has grown, flourished and is now wilting fast.
"If the market fails to recover in the longer term, borrowers coming off a sub prime fixed term deal in the next year or two could be placed in a difficult position, especially if their financial position has not improved sufficiently to allow them back into the prime market.”
