71% decline in subprime

There has been a 71 per cent decline in the number of subprime lending products available in the UK market in the last 12 months.

According to research carried out by personal finance advice website Moneyfacts.co.uk, there were some 6,501 subprime products available to lenders in March 2007.

This is now fallen to just 1,867 – a decline of 71 per cent.

The market is declining at such a rate several organisations have stopped offering products in the market this week alone, including Amber Homeloans, Scarborough Specialist Mortgages and SALT.

In addition Northern Rock has announced that it will no longer be offering subprime mortgages funded by Southern Pacific Mortgage.

Subprime lending has become an industry boogie man following a dramatic increase in American's defaulting on mortgages in the latter stages of 2007 and the resulting credit crunch.

"Lenders are finding it increasingly difficult to find funding for subprime mortgages. Investment banks have been hit hard by the troubles facing the US subprime market and therefore are less willing or able to securitise the mortgage books of UK subprime lenders," explained Julia Harris, mortgage analyst at Moneyfacts.

"In a society where we continue to witness ever-increasing debt problems, this is going to limit the options available to those that have to resort to subprime borrowing."

According to Moneyfacts this rapid decline continues the trend seen late last year.

"The latest withdrawals from the market have come in what appears to be a second phase of tightening. Towards the end of 2007 we saw a severe drop in the number of sub prime mortgages available," continued Ms Harris.

"Many lenders cut the volume of products they were offering but did not withdraw completely – in the hope that the market would recover.

"Now lenders are facing up to the reality that things are not going to get better in the near future. In fact it seems that there is more blood on the carpet yet to be spilt."