RECORD Money: MORTGAGE SHORTAGE; as Lenders Go Low-Risk, It's More Important Than Ever to Get Advice

Article excerpt

Byline: By ALEX MORGAN

IFYOU'RE looking to remortgage, or to get your first home loan, you could be in for a nasty shock.

In recent weeks, lenders have been withdrawing deals hand over fist and increasing the rates on the ones that remain.

It's all down to the transatlantic credit crunch. Fears about massive bad debts in the US banking sector have got UK banks and building societies well and truly rattled.

The Bank of England has cut its base interest rate twice in the past four months, which would normally bring loan costs down.

But financial website MoneyExpert.com says the cost of the average two-year fixed-rate mortgage has actually risen - from 5.55 per cent in January last year, when base rate was the same as it is now, to 6.17 per cent this month.

On a pounds 100,000 repayment loan, that's an increase of pounds 456 a year.

Lenders have also become much more careful about the amount they will lend and who they will give it to.

According to financial information site Moneyfacts.co.uk, there were almost 16,000 different mortgage deals available last July.

There are now just over 6000.

Last summer, lenders were falling over themselves to offer up to 125 per cent of property valuation.

Now, no one is willing to advance over 100 per cent. Most won't go above 95 per cent and those that will are covering their backs by charging a substantial premium.

Some have gone even further. Cheltenham &Gloucester now demands a minimum deposit of ten per cent, and Nationwide is reserving its best deals for those who can put down a massive 25 per cent.

Lenders across the board are concentrating on attracting what they class as low-risk customers - in other words, the ones they consider most likely to keep up their repayments.

If you're coming to the end of a cheap deal and need to remortgage, or are hoping to get a toe on the property ladder, that could be very bad news indeed if you have a high level of debt, past credit problems, uncertain earnings or a small deposit. It doesn't mean you can't borrow, but it is going to take more time and effort to secure a decent deal.

Because of that, whatever your circumstances, it's more important than ever to enlist the help of an independent mortgage adviser, who can search the entire market on your behalf. …