Bank turmoil sees many mortgage products vanish

By Lorraine Turner

LONDON (Reuters) - The number of mortgage products on sale has slumped 12.4 percent so far this week after lender Bradford & Bingley BB.L exited the market and as the property sector buckles under global market turmoil.

The total number of mortgage products declined to 3,427 from 3,914 on Monday, according to Moneyfacts.co.uk.

In the buy-to-let sector, 195 products have been dropped leaving 467 products available mainly because Bradford & Bingley's entire mortgage book was nationalised after being taken under government administration on Monday.

The Treasury has said it will wind down B&B's 41.3 billion pound mortgage portfolio.

The demise of the largest buy-to-let lender came amid signs that lending to the property market is rapidly drying up.

Mortgage lending rose by just 143 million pounds in August according to Bank of England data, just 2 percent of its level a year earlier and the weakest rate of growth since the series began in April 1993.

Alex Potter, banking analyst at Collins Stewart, said four out of the top six UK buy-to-let lenders had now disappeared or are cutting back lending, namely B&B, HBOS, Paragon and Lehman.

"(Bank of Ireland's) Bristol & West unit is also likely to make it five, restricting credit," Potter said in a research note, predicting the shrinking market for buy-to-let loans would lead to "material interest stress" for landlords.