B&B rescue plan sparks mass mortgage product withdrawal

The number of mortgage products available in Britain fell by more than 11 per cent between Monday and Tuesday, as the intensifying financial crisis prompted dozens of lenders to withdraw their most competitive rates, giving brokers and customers just a few hours' notice.

By yesterday morning, 3,469 mortgage products were on offer, compared to 3,914 the day before, according to the comparison service Moneyfacts.co.uk. Since the start of the credit crunch, mortgages on offer to home buyers have fallen by 60 per cent, while buy-to-let investors have 85 per cent fewer loan packages available to them.

Michelle Slade, an analyst at Moneyfacts.co.uk, said the nationalisation of Bradford & Bingley accounted for much of the sudden drop in products available on Monday. However, Halifax, Bank of Scotland, Bristol & West Mortgages and Newcastle Building Society were among a number of other lenders to take a step back. "This news will be another blow for mortgage borrowers, as not only do they now have a more restricted choice, but the insecurity in the money markets has caused many lenders to increase their rates," said Ms Slade.

Melanie Bien, a director of the independent mortgage broker Savills Private Finance, said a rise in rates had been likely for several weeks but it was the combination of events on Monday that led to the sudden withdrawal of so many products.

"Money market rates had been rising for some days so it was inevitable that lenders would have to pull rates and reintroduce more expensive deals at some point," she added. "The majority bided their time as no one wanted to move first but, with HSBC and Woolwich repricing at the end of the previous week, the floodgates opened."

Although mortgage rates are rising again, there is an increasing chance that the Bank of England will drop base rates within the next few weeks, which should eventually help to ease the cost of mortgages again.