Effect of Lehman Brothers' collapse on UK mortgage market

Commenting on the effect of Lehman Brothers' collapse on the UK mortgage market, Louise Cuming, head of mortgages at moneysupermarket.com, said: "Lehman's collapse is a blow to the mortgage market. For the past few weeks the trend has been for mortgage rates to come down and the number of available mortgage products to increase, giving a glimmer of hope to those looking to remortgage or buy.

"However, since the collapse of Lehman Brothers we've already see a huge jump in the LIBOR rate (the interest rate at which banks lend to each other) from 5.5 to 6.8 per cent - and I fear we'll soon see lenders raising mortgage rates due to this. We may also see further tightening of already very tight lending criteria.

"It is a vicious circle now, with consumer confidence being knocked by all of this news - and when people are worried they are far less inclined to make the biggest purchase of their life."