Twelve months ago, a mortgage borrower could pick and choose from in excess of 15,000 mortgage products and handed an advance of 125% of the actual property value.
Most mortgage providers now have a reduced appetite to lend, credit scoring has been adjusted to reflect a general image of today's household expenses and borrows are requiring a deposit, of between 20 and 25 percent, at best.
The last resort for a growing number of borrowers is reverting to their lender's standard variable rate and it is not unreasonable to predict that a majority of borrowers will be left with only this option during the next six months, if markets do not improve.
Standard variable rates (SVRs) have historically been seen as being unfashionable and generally only associated with borrowers who have around £5,000 left on their mortgage. Hence, lenders have generally ‘toed the line' in adjusting their SVR in line with base rate changes. Unlike other headline rates, there has not been a notable change for increased margins for risk and Standard variable rates have externally been unaffected by the uncertainties of SWAP and LIBOR rates.
Subsequent to the base rate reducing to 5.00% in April, 38 lenders did not pass on the full 0.25% cut and 15 of these lenders did not reduce their SVR at all.
We hope, under the current economic climate, that the polls are correct and no base rate change takes place on Thursday at 12h00 and stays at 5.00%, otherwise an increase might give lenders the opportunity to adjust their SVR well above the base rate movement and wipe out any option of a reasonable last resort.
Posted
Jul 10 2008, 09:08 AM
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