Mortgage price war forces AA Mortgages out of the market

Second lender shuts up shop in a WEEK as mortgage price war forces AA Mortgages out of the market

  • AA Mortgages has confirmed it will stop lending on all new mortgages
  • It follows Fleet, Amicus, Secure Trust and Magellan Homeloans
  • AA cited ‘highly competitve’ market conditions as the reason for its exit
  • Existing customers won’t be affected, but those in the pipeline may be 

AA Mortgages is the fifth lender to close its doors to new customers in the past three months as fierce pricing wars force providers out of the market.

The lender confirmed today that it will not be offering mortgages to new customers for the foreseeable future, however it did not rule out re-entering what it described as a ‘highly competitive market’ in the future.

This won’t affect existing customers, but if you already have an agreement in principle from AA Mortgages, you’ll have to complete your application within 30 days from the date you received it or you’ll lose it. 

AA Mortgages are underwritten by the Bank of Ireland, which says it ‘supports AA’s decision to stop offering mortgages to new customers for the time being’. 

But it declined to confirm whether it or AA Mortgages was behind the decision to stop new loans under the AA banner. 

AA Mortgages follows other lenders Fleet, Amicus, Secure Trust and Magellan out the door

The Bank of Ireland also underwrites mortgages provided by Post Office Money. 

When asked whether there were plans for Post Office to stop new mortgage lending, a Bank of Ireland spokesman replied that both ‘Bank of Ireland and the Post Office remain committed to providing mortgage products for Post Office customers’. 

The small exodus of lenders since December has led to concern these could be early warning signs that a second credit crunch is on the way.

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Sub-prime mortgage lender Magellan Homeloans called time on all new lending a week ago today, claiming competitive pressures in the mortgage market.

In a statement, the specialist mortgage lender said increasingly expensive funding costs combined with the competitive pressure to keep mortgage rates low meant it could no longer justify making new loans.

Magellan specialised in lending to borrowers who have suffered from poor credit in the past as well as offering mortgages to those with complex incomes or who are self-employed.

It was the fourth specialist lender to shut up shop in three months, following the closures of buy-to-let specialist Fleet Mortgages, Secure Trust Bank and Amicus.

Fleet Mortgages, a specialist buy-to-let lender, was forced to close its doors to new lending on 8 January after failing to secure finance from investors to fund any more new loans.

The previous day, Secure Trust Bank confirmed it would cease offering new mortgages immediately due to ‘market pressures…competition intensifying, as evidenced by increasing loan-to-value metrics and lower new lending margins’.

In mid-December, Amicus – a specialist lender offering short-term mortgages to property developers and landlords – was forced to stop all new lending and on 4 January confirmed the business had been put into administration.

Writing in an industry blog, Lynda Blackwell, the former mortgage sector manager at the Financial Conduct Authority and now an independent consultant, said: ‘ There are over 140 active lenders in the market today but the top six account for around 73 per cent of total residential lending in the UK.

‘That leaves 136-plus active lenders chasing a 27 per cent share. Those lenders can’t possibly compete with the top six, with their massive funding advantage and dominant position in the market.

‘We’re starting to see the impact of all of this with firms halting lending and even exiting the market. Something has to give.’