New mortgage offer introduced as lending continues to suffer

An offset tracker mortgage product that is designed to track the bank of England base lending rate plus 2.48 per cent for the entire life of the loan has been launched into the market.

Currently priced at 2.98 per cent or 3.2 per cent APR, the new product has been introduced by first direct, which is urging people to take advantage of the "market beating" offer as it will not be available for long.

According to the lender, the product, which is unlike any other tracker mortgage currently available, offers customers the guarantee of being capped at under five per cent until 2012.

"It's great to be able to offer this unique mortgage at the moment with the added benefits of being able to offset," said Jimmy Kelly, the mortgage manager for first direct.

"We wanted customers to be able to take advantage of the current low base rate and offer the security of knowing that their mortgage rate won't go above 4.99 per cent for the next three years.

Launched as part of the company's summer sale, the offset-capped tracker rate mortgage will only be available to new customers for the month of July.

Meanwhile, moneyextra.com has issued a call to UK banks to resume normal volumes of lending because the number of mortgage products has been in decline in recent times.

According to the organisation's managing director Richard Mason, the last month alone saw the products decline by 15 per cent, with fixed mortgage products making up the bulk.

In light of fixed mortgage products falling by 24 per cent since May 2009, Mr Mason said it "doesn't make sense, and is frankly unacceptable, as one of the key reasons for lender caution has since been removed".

"Banks initially cut back on lending because of the volatility in the property market which left them uncertain about the value of securities," he explained.

"However, given the housing market's recent stabilisation and a return in consumer confidence, we should be seeing the number of products rise, not fall; there is simply no reason for banks to hold back lending any longer."

He went on to "strongly urge lenders against deserting the UK economy in its time of need" and called upon them to step up their lending, especially to first-time-buyers.

Apart from helping people make that all-important step on to the housing ladder, the move will also prevent the housing market from "plunging into a deeper economic abyss".

Current mortgage holders will, meanwhile, can now start benefitting from new regulation that has been introduced by the Financial Services Authority (FSA) for sale-and-rent-back schemes.

All companies operating in the sector are now required to sign up with the FSA by July 31st.