Product ranges slashed as lenders 'allow market to stagnate'

The number of different mortgage products on offer has fallen by 40 per cent in the past three months as lenders respond to the global credit crunch, according to financial analyst Moneyfacts.

The shift has been most marked in the sub-prime sector, as banks and building societies pull home loans for people with poor credit histories. But the mainstream lending market has not escaped unscathed – with lenders taking a more cautious stance across the board.

"While most of this can be attributed to the sub-prime market – seeing a 72 per cent reduction in the buy-to-let market and a 54 per cent cut in residential deals – the 16 per cent fall in prime residential products is worth noting," said Julia Harris at Moneyfacts.

She added that part of the fall could be attributed to Northern Rock slashing its 230- plus product range to just 70, as well as the merger of the Nationwide and Portman building societies.

"The rest can only be down to many lenders making more minor changes. Some are withdrawing their higher risk products; others are simply streamlining their ranges."

Ms Harris is not only concerned that this 40 per cent reduction will mean less choice for borrowers, but also that lenders "seem to be allowing the market to stagnate".