Impact of the Credit Crunch on UK Mortgage Product Structures

Publication Date	July 2008
Publisher	Datamonitor
Product Type	Report
Pages	19
ISBN Number	not applicable
Product Code	DAT12967

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Summary

Introduction

The severe repercussions from the US sub-prime crisis have been felt in most of the world's economies, but none more so than Western Europe, and in particular the UK. The effects of this lack of liquidity have turned the UK mortgage market on its head, and lenders are now making sweeping changes to product structures in an effort to stabilize their product portfolios in the turmoil.

Scope

Illustrates changes in the mortgage market between 2007 and 2008, including number of prime, sub-prime, first time buyer and remortgage deals.
Details the changes to mortgage product structures (LTV ratios, pricing, maximum borrowing)
Assesses future changes to the UK mortgage market and product structures

Highlights

The first quarter of 2007 saw 503,000 mortgage deals written for a total of 84 billion. In the first quarter of this year, approximately half that number were written, while the value of mortgage deals dropped by almost 10 billion to 75 billion.

The market has decreased steadily since June 2007, but the largest drop occurred in 2008, resulting in a cut of almost 800 mortgage offers from the market.

Although it is unlikely to recover to pre-credit crunch levels, the mortgage market needs to stabilize in order for a traditional and affordable mortgage product structure to resurface.

Reasons to Purchase

Understand how the credit crunch has changed the mortgage market playing field.
Learn how lenders have changed their mortgage product structures due to the credit crunch.
Gain insight on the future of the market to correctly steer future product development strategy.

Content

Datamonitor View
Catalyst
Summary
Analysis
The Uk Mortgage Market Has Shrunk Following The Liquidity Crisis
The Lack Of Funds In The Uk Money Markets Has Led To Drastic Changes In The Mortgage Market
Lenders Have Resorted To Using A Number Of Strategies To Balance Demand With Supply
A Large Number Of Mortgage Deals Have Disappeared Off The Market
Some Lenders Have Suspended New Originations
Mortgage Product Structures Have Changed Considerably
Sub-Prime Mortgage Products Are Very Limited
Ltv Ratios Have Decreased Significantly Across All Mortgage Products
While 100% Ltv Mortgages Still Exist In The Market, They Are Only Available In Restricted Regions Or With Heavy Credit Guarantees
The Average Maximum Ltv Has Decreased By 8.9% In 12 Months
Fixed-Rate Mortgages Are Currently The Most Expensive They Have Been In The Last Decade
Even Mainstream Lenders' Best Fixed-Rate Offers Are Not Particularly Attractive
Lenders Will Continue To Differentiate Prices Between Distribution Channels
Maximum Advances Are Lower By Over 200,000 Compared To June 2007
The Impact Of The Credit Crunch Will Accelerate Through 2008
The Sub-Prime And Near-Prime Markets Will Continue To Be Worst Hit
First Time Buyers Will Continue To Struggle To Find Credit
Mortgage Product Innovation That Demonstrates A Tangible Benefit To Home Buyers Will Win New Market Share
Hsbc's Ratematcher Mortgage Offers A Competitive Remortgage Rate To Struggling Homeowners
Lloyds Tsb's Airmiles Mortgage Helps Consumers Forget Their Credit Problems
Appendix
- Supplementary Data
- Definitions
- Bank Of England Base Rate
- Fixed Rate Mortgage
- Gross Advances
- Sub-Prime
- Remortgaging
- Tracker Mortgage
- Variable Mortgage
- Methodology
- Further Reading
- Ask The Analyst
- Datamonitor Consulting
- Disclaimer
- Table 1: Largest Reductions In Mortgage Product Offering By Lender, June 2007-08
- Table 2: Lenders Closed To New Business, By Number Of Mortgage Deals Offered In June 2007
- Table 3: Comparison Of Top 10 Lenders' Maximum Ltv Ratios, June 2007-08
- Table 4: Top Five Cheapest And Top Five Most Expensive Svr Mortgage Offers, June 2008
- Table 5: Comparison Of Top 10 Lenders' Fixed And Standard Variable Rate Mortgage Offers, June 2008
- Table 6: The Number Of Prime Residential Mortgage Offers, June 2007-June 2008
- Table 7: Number Of Sub-Prime Mortgages And Sub-Prime Lenders, June 2007-08
- Table 8: The Number Of 95% Ltv Mortgages And The Number Of 100% And 100%+ Ltv Mortgages, June 2007-June 2008
- Table 9: Average Maximum Borrowing, June 2007-June 2008
- Table 10: Number Of First Time Buyer And Remortgage Offers, June 2007-June 2008
List Of Figures
- Figure 1: Prime Residential Mortgage Deals Have Decreased Significantly Since June 2007
- Figure 2: The Number Of Sub-Prime Mortgages Has Halved In One Year
- Figure 3: Mortgages With 100%+ Ltv Ratios Have All But Disappeared From The Market
- Figure 4: Average Maximum Borrowing Decreased By 200,000 In H2 2007
- Figure 5: Mortgage Offers For First-Time Buyers And Remortgagers Fell Sharply In Q2 2008