Wholesale market funding increases raise mortgage rates and threaten lending.

Mortgage rates have steadily risen over the past few months because of increased wholesale funding costs. Mortgage providers are now advising that these cost increases could force a scaling back of mortgage lending on a national scale.

In light of this news, would-be buyers and home-owners looking for more competitive mortgage rates are being advised to apply for a deal soon before the cheapest products disappear.

Lloyds have reacted to increased funding costs by recently announcing it's intention to cut back its UK mortgage market share by 3 per cent. Reduced lending will occur through customers reaching the end of their deal choosing not to remortgage and a reduction in new lending levels.

As at present only one UK lender has announced a reduction in lending, it should not impact the market greatly, other mortgage providers are expected to take up the business. However if this announcement triggers others to similarly reduce lending then the outcome could be very different.

Mortgage market funding is at present high when compared with pre-credit crisis levels. It is anticipated that over the next few years lenders will compensate for rising costs by increasing their retail deposits, which is exactly what Lloyds have announced they intend to do.

Lenders will have to take action because if they don’t the cost of credit for home-owners and consumers will continue to go up.

If your lender is increasing it's mortgage rates and you need a more competitive offer, contact Deal Direct and we will compare all UK lenders offers on your behalf.