HBOS ends annual mortgage targets

04-Oct-2007

HBOS has said that it is ending its practice of setting annual targets for mortgage lending in what is being interpreted as a sign that the credit crunch is set to have a significant impact on the mortgage market.

What's more, Britain's biggest mortgage lender has said that it believes that increased costs will "inevitably" cause the market to slow significantly in the future.

HBOS added that it will now look at lending volumes on a month-by-month basis rather than taking a longer-term view.

With the London Interbank Offered Rate (Libor) now falling, some mortgage rates are coming down, but this could be tempered by tighter lending conditions enforced by more nervous lenders.

What is likely to now materialise is that borrowers with better credit scores are likely to receive more favourable rates, while others are likely to struggle even more, potentially turning to joint ownership schemes or even looking for parental help.

"The result of all this will be two-fold. First-time buyers will find it harder to get a foot on the ladder, with lenders only recognising the very safest applicants, while existing homeowners experiencing financial problems will find it increasingly difficult to ‘borrow’ their way out of trouble," commented moneysupermarket.com head of mortgages Louise Cuming.

"At the other end of the food chain, borrowers with a strong credit profile, stability of employment and good earnings should find it increasingly easy to get a mortgage as lenders compete for their business.

"So we may well see a borrowing hierarchy with the new 'underclass' losing out heavily," Ms Cuming added.

Troubled Northern Rock has also announced a change to its lending policies, withdrawing two thirds of its products and saying it will be "simplifying" its range of mortgages.

Higher mortgage costs for first time buyers:
http://www.firstrungnow.com/first-time-buyer-news/higher-mortgage-costs-3533.aspx"

First time buyers hit by lender hikes
http://www.firstrungnow.com/first-time-buyer-news/first-time-buyers-hit-3526.aspx

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