Moneysupermarket: New borrowers hit by "double whammy"

Date:Friday 26th September 2008

New mortgage borrowers have been hit by a "double whammy" of increased interest rates and tighter lending criteria, comparison website has found.

The website noted that the global financial turmoil of last week caused the London interbank offered rate, or Libor - the interest rate banks charge each other - to increase.

This in turn made banks more unwilling to lend to each other and has impacted upon new borrowers.

Moneysupermarket found that Abbey and Britannia both withdrew various tracker and fixed-rate mortgages, while other lenders such as Woolwich, HSBC and First Active replaced particular fixed products.

Bradford & Bingley has also ceased new mortgage business.

Moneysupermarket said it was a "grim week" and that the mortgage market is now open only to people with "impeccable credit records and a deposit of 25 per cent or more".

However, Britannia Building Society announced cuts in mortgage rates this week on tracker products including flexible and offset packages.

It has also introduced new loan-to-value bands on most of its products.

Tim Franklin, managing director of member business, said the society wanted borrowers to have "a better choice".