Companies working in the mortgage market have experienced a significant series of events which completely changes how mortgage business will be done in the future.
A lot of anger has been directed at lenders for changing criteria and hiking interest rates when the UK Bank of England base rate has been going down.
The problem is that there are good reasons behind lenders decisions over the last few months. The industry has experienced an under supply of very competitive and innovative mortgage products in the last 6 months. There could now be the prospect of a shortfall of funding throughout the full range of product sectors over the next 12 months.
The situation has led to lenders no longer providing the major distributors with exclusive products, but also to the withdrawal of their product range without any reasonable notice. The reason for this is that lenders are now requested by the FSA to report their lending, saving and liquidity position on a daily basis.
Daily cash flow by all lenders is now such a crucial element of their own survival, it influences their lending policy which impacts on what and how they can lend. Lenders are now more reliant on their own deposits for lending as the money markets are still effectively shut.
Lenders are not wanting to lend less through choice, they have few options at present. This situation is unlikely to improve for some time unless the Bank of England and Government intervene to restore confidence in the wholesale markets.