Lenders bid for your mortgage

A new eBay-style online service for homebuyers where mortgage lenders compete against each other to provide people with cheaper home loans went live this week.

Mortgagebundles.com aims to change the way people take out mortgages by combining bulk-buying with online auction techniques. The service works by grouping together people with similar mortgage requirements and characteristics into "bundles". These can range from just one borrower to as many as 500. The bundles are then auctioned online among the participating lenders. The borrower can choose to accept the deal they are offered or walk away.

So far, mortgagebundles.com has signed up more than a dozen mortgage lenders, including Nationwide. It is free to use for borrowers, but lenders have to pay fees. The founders claim the concept will drive down the overall cost of mortgages and make it easier for people to find a good deal "because the lenders come to the borrower".

Borrowers register online, then answer questions about their mortgage needs and credit history. Within about two days, consumers are told which lender is offering the best deal from the auction. They are given the terms of the deal and invited to apply.

More than 1,000 people had already registered for auctions by Wednesday morning. Some borrowers have already accepted offers made by lenders, though a spokeswoman says it is "too early to talk about the value of those deals and the cost savings so far"