The number of mortgage products available to consumers has dropped to its lowest level on record, according to price comparison website Moneysupermarket.com.
Borrowers now have just 2,282 deals to choose from – less than half the number of products available one year ago and more than 90 per cent below the numbers at the height of the property boom in August 2007.
First-time buyers have even less choice, with just 1,195 products available compared to almost 20,000 deals two years ago.
“Despite all the recent initiatives from the Government and Bank of England, the lack of credit is an ongoing problem,” said Louise Cuming, head of mortgages at Moneysupermarket.com.
”This will continue to hinder any sustainable recovery in the housing market so until this changes, and more mortgages become available, house price growth will remain muted at best, with further falls possible, and many borrowers will struggle to get a mortgage.
”Unfortunately it is doubtful that the number of products will increase significantly any time soon. Lenders are competing to attract the same borrowers - those that are seen to offer the least risk to the bank – and there is no sign of this trend changing.”
Ray Boulger, senior technical manager at mortgage broker John Charcol said that while some major lenders have pledged to increase lending, the number of smaller lenders that have dropped out from the market and it is this that has caused the mortgage market to squeeze.
He also said that a large part of the drop in numbers was down to the withdrawal of specialist lenders from the market. “Prior to the credit crunch there was a huge number of sub prime and self-certification mortgages on offer but that market has almost disappeared,” said Mr Boulger. “Many of these lenders used to offer different loan-to-values to different customers but now they have stopped lending to these borrowers altogether.”
The price comparison website’s figures follow on from Tuesday morning’s meeting between the FSA and the Treasury Select committee where John Pain, the FSA’s managing director of retail markets said the market for specialist mortgages had ”reduced to almost non-existence”.
Mr Pain also said that imposing “caps or collars” on mortgage lending based on income or deposit ratios could be a crude tool for measuring affordability. Instead, he said lenders had more sophisticated ways to work out whether a household could repay a home loan. Assessing a loan on the basis of income versus mortgage was a “superficial” ratio, he said.
He said Mr Pain said that the level of a household’s disposal income - after paying mortgage payments - was a more appropriate figure than loan to value or loan to income ratios.
