Grab a mortgage while you can, brokers urge

Britain's biggest mortgage lender Halifax today said it would raise its rates by an average of 0.35 per cent for new deals from Monday "in line with market pricing". The biggest increases will be imposed on buyers with less than 10 per cent deposits.

With the market in unprecedented turmoil, brokers and advisers said borrowers had to make an instant decision before competitively priced deals are pulled from the market.

In the last two days alone, almost 600 deals have been scrapped.

Brokers said they were encouraging customers to apply for their mortgages months in advance.

Richard Morea of London & Country mortgages said: "Until recently, the companies would tell us with plenty of notice if they were planning to withdraw a product so we could ring up the client and warn them. Now we don't get told in advance. Anything that's competitively priced, particularly from the higher-profile lenders, is going, going, gone."

As many mortgage offers are guaranteed for up to six months, customers can reserve a deal now even if their current one does not expire until late summer.

Mr Morea said: "We're saying, if you like this offer, grab it now even if you don't need it for a few months."

Nottingham Building Society pulled its buy-to-let two- and three-year tracker last night, while the West Bromwich withdrew all its mainstream and buytolet mortgages, replacing them with more expensive options. Darlington Building Society also withdrew its fixed products.

First Direct, the internet and telephone bank owned by HSBC, this week closed its doors on new mortgages, while Nationwide has jacked up rates for many borrowers, particularly first-time buyers.

Rob Clifford, of broker Mortgageforce, warned: "Can you rely upon a quote from a lender? The answer is no. Lenders are not obliged to honour quotes and could elect to reject applications or offer less attractive deals.

"Consumers haven't got a cast-iron deal unless they have received a formal mortgage offer from the lender."

The Bank of England is warning that almost half of all lenders will ration mortgages over the next three months. It concedes that two interest rate cuts from 5.75 per cent to 5.25 per cent, have done nothing to reduce mortgage costs as banks and building societies put up their own rates. The Bank is expected to cut rates to five per cent next week.

The squeeze on credit by mortgage suppliers and the prospect of job cuts in the City are already hitting the housing market. The International Monetary Fund warned British house prices are overvalued by almost 30 per cent.

Default rates on mortgages are expected to rise sharply this year.

Philip Shaw of Investec said: "The situation has deteriorated further and that's consistent with news that mortgage lenders have been raising rates and withdrawing products. We feel there is a strong case for rates coming down next week."