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 06 September 2008 03:54 BST

Last of the 100 per cents: Abbey drops mortgage

Tuesday, 08 Apr 2008 14:41
Abbey drops 100 per cent mortgage

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The last 100 per cent mortgage on the market has been dropped by Abbey amid rival lenders raising interest rates and cutting mortgage deals.

Mortgages covering the full value of a property started to disappear from the market in February and all deals are now off – meaning first-time buyers need to raise a deposit of at least five per cent to get on the property ladder.

Only Bristol and West offers a 100 per cent mortgage – but the loan is linked to guarantees from parents.

A year ago there were more than one hundred 100 per cent loan-to-value (LTV) mortgages on the market.

Abbey will stop offering its 100 per cent deal tomorrow.

An Abbey spokesperson said: "From Wednesday April 9th, we are withdrawing our 100 per cent loan to value (LTV) mortgage until further notice.

"This is normal given the current market conditions and is in line with recent moves by other lenders."

Fears are now rife in the market that the minimum five per cent deposit could grow to ten or even 15 per cent – as mortgages become rationed as banks are hit by the high cost of inter-bank lending, despite the Bank of England dropping interest rates.

Gordon Swan, from online mortgage firm mform.co.uk, explained if house prices fell five per cent, then five per cent deposits could still be a risk for banks and deposits would have to grow.

"Loan sizes could go down to 90 per cent," he said.

However, he expected 100 per cent mortgages would eventually return to the market.

"They have come and gone from the market over the years."End of story


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