Abbey ditches last 100% mortgage

Abbey is dropping the last 100 per cent mortgage on the market following the parade of lenders to up interest rates or cut 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 fifteen 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, an 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."

Mr Swan also added banks were in part using rising in interbank rates to take advantage of the market to make profits and if the Bank of England cut rates this week, they would be under pressures to keep rates up to attract savers.

mform.co.uk research also reveals first-time buyers are not only having to raise larger deposits and face higher interest rates, they are also seeing increasing fees.

Fees at the biggest five lenders have increased by 35 per cent in the last year from £637 to £857.

The rate on a first-time buyer mortgage has now increased from five per cent last year to 5.8 per cent now – putting average annual repayments up by £920.

Francis Ghiloni, at mform, said: “These are tough times for first-time buyers.
"Lenders are generally asking for larger deposits and with fees and interest rates on the up, borrowers will need to be sure about their ability to meet these commitments before taking a step on to the property ladder."