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Rate gap grows as just 10 lenders take 85% share

The gap between average mortgage rates and the Bank of England base bank widened from 2.2 per cent in 2008/09 to 3.7 per cent in 2009/10, according to FSA figures.

The FSA data on product sales between April 1 2009 and March 31 2010 also reveals that 10 mortgage lenders accounted for 85 per cent of all mortgage business.

The figures show that the proportion of remortgage business plunged from 60 per cent of all mortgage transactions in 2008/09 to 38 per cent in 2009/10,

The proportion of mortgage transactions that were loans to homemovers rose to 36 per cent from 23 per cent in 2008/09. The proportion of loans to first-time buyers increased from 13 to 22 per cent over the same period.

The proportion of mortgage transactions that were advised sales increased marginally from 67 per cent in 2008/09 to 70 per cent in 2009/10.

The proportion of mortgage lending below 75 per cent loan to value increased from 69 per cent to 74 per cent over the same period while the proportion of lending over 90 per cent LTV fell from 6.5 per cent to 1.8 per cent.

The proportion of mortgages where income was not verified dropped from 51 per cent in 2008/09 to 40 per cent in 2009/10.

The proportion of self-employed borrowers fell from 15 per cent to 12 per cent over the same period.

The proportion of mortgages sold to credit-impaired borrowers dropped from 1.53 per cent to 0.42 per cent between 2008/09 and 2009/10.

Abacus Financial director Matthew Fleming-Duffy says that, for mortgage brokers, the number of lenders that most mortgage business is being directed to is even fewer than 10.

He says: “In terms of intermediary business, it is more like five lenders that are getting most of the business, because there are even fewer best-buy deals that are available through brokers. It is not good for competition.”

Fleming-Duffy says he is not concerned that the spread between mortgage rates and the base rate is so high as he says it is crucial for banks to repair their balance sheets.

But he adds: “I hope that this spread starts to narrow when base rate starts increasing or it will price more borrowers out of the mortgage market.”
Flemming-Duffy is concerned by the drop in higher loan-to-value mortgages and loans to credit-impaired borrowers.

He says: “It is right that the number of these mortgages is down on 2007 but for the number to be down on 2009 figures is more concerning as the market was already subdued then.

“The worry is that this will lead to more forced sales as many borrowers will not be able to remortgage.”

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