Co-op follows First Direct in suspending mortgage range

02-04-2008

Co-op follows First Direct in suspending mortgage range
The Co-operative Bank is dropping its entire two-year fixed rate mortgage range due to "unprecedented levels of customer interest and demand".

In a similar move to rival lender First Direct, which yesterday suspended all mortgage lending in order to clear a huge backlog of customer applications, the bank will stop selling its two-year fixed products tomorrow.

John Barker, head of mortgages at Co-operative Bank, said: "We pride ourselves on our ability to create long-term customer relationships and will not compromise our market leading levels of customer service, by simply chasing business volume at any cost.

"We have as a result, therefore, decided to withdraw our two-year mortgage range on a temporary basis."

Co-operative Bank's three, five, ten and 25-year mortgages remain open to new and existing customers.

Over the last five days, First Direct stopped its entire mortgage range to new customers as well as Nationwide and Halifax both increasing interest rates to slow demand.

US bank Lehman Brothers has also today suspended UK mortgage lending through its subsidiaries Preferred Mortgages and Southern Pacific Mortgages.

A statement on both Preferred and Southern Pacific websites reads: "While our strategy remains to continue in the servicing business, SPML will be suspending new originations from April 2nd 2008 onwards."

As the number of mortgages on offer falls, the UK housing market looks set to see house price falls in the coming year.

Today Bank of England figures showed UK mortgage approvals were down 37 per cent over the last year.

Brigid O'Leary, property economist at Capital Economics, said: "We would not be surprised to see even lower mortgage approvals soon.

"On the demand side, fears of falling house prices will keep new buyer enquiries weak. At the same time, the supply of mortgage credit is falling. Lenders have reduced the number of mortgages available, increased borrowing rates for new and existing customers, and are demanding higher deposits to secure funding."

She added: "We expect house prices to fall by five per cent this year, and to fall further in 2009."

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