moneysupermarket.com: Chelsea revised mortgage range

Commenting on Chelsea Building Society’s revised mortgage range, after pulling its products from the market for a few days, Louise Cuming, head of mortgages at price comparison site moneysupermarket.com, said:

"Following the pattern of a number of bigger lenders withdrawing some of their most popular products, it was only a matter of time before a few of the smaller mutuals followed suit, as their lending is based on the limited retail funds they have available.

“Building societies are restricted on how they lend, and at least 50 per cent of what they lend must come from retail deposits; when these dry up, their focus shifts to attracting savers to shore up their books. Smaller lenders also have to take immediate action to manage the surge of application volumes created by the bigger players reducing their offers and Chelsea Building Society withdrawing completely from the market for a few days is a classic example. Smaller building societies such as the Newbury, Melton Mowbray and the Tipton & Cosely have also restricted lending to small geographical areas around their branch offices, or have drastically reduced the maximum LTV they will consider.

“Halifax today warned it was 10 days behind with looking at post, indicating that speed and service are now becoming real issues, even for the largest of lenders.

“Chelsea Building Society’s re-introduction of mortgages with increased rates is to be expected, and although there are still some fixes and trackers for up to 95 per cent LTV available, only customers with squeaky clean credit scores are likely to be able to access these, and even then the rates are likely to be higher than average.

"The flow of money into the mortgage market is slowing, so we are heading for a correction that may ultimately be good for the long-term health of the economy. Unfortunately it is the first-time buyer who will suffer now, due in part to the careless approach to lending of some over the past few years.”