First-time buyers could face a financial headache as the market for 100%-plus mortgages shrinks.
The market has changed following developments at Northern Rock
Four lenders are this week pulling the plug on deals offering mortgages topped up with an unsecured loan.
The offers allowed first-time buyers to get on the property ladder without a deposit, but were also criticised for letting people take on more debt.
The move could lead to higher repayments for first-time buyers when they come to remortgage.
Lenders 'tighten their belts'
The first lender to move was Alliance and Leicester, which said it was removing its 125% PlusMortgage on Tuesday. This offered a mortgage of up to 95%, along with an additional unsecured loan.
Stephen Leonard, director of mortgages at Alliance and Leicester, pointed to "market conditions" as the reason for the decision.
Coventry Building Society announced it was to stop selling its MOREgage product on Friday.
Colin Franklin, head of sales at the Coventry, said applications for this kind of mortgage had fallen to "a negligible level", making it "no longer cost-effective" to offer.
Abbey then said it was ending on Friday a pilot scheme for 125% deals that it started in the autumn, while Godiva Mortgages also said it was withdrawing the product.
That leaves Northern Rock, which has sold more of these deals than any other lender, but has recently raised rates to a level that make it far less competitive.
Birmingham Midshires, owned by the Halifax, also remains in the market, but was reviewing the situation this week.
Effect on borrowers
Some 20,000 people take out these deals each year. The latest moves will affect those intending to enter the market and those needing to remortgage, who will face higher repayments due to a lack of similarly competitive deals.
The deals had been popular with those who wanted a loan on top of the mortgage, as they did not have the money to pay a deposit or wanted to make a start on home improvements.
Louise Cuming, head of mortgages at price comparison site moneysupermarket.com, said: "With so many prominent lenders exiting the 100%-plus mortgage market this week, consumer confidence is going to be knocked again.
"First-time buyers will be hit hardest, with repayments likely to shoot up when they come to remortgage. At a time when consumer confidence is so low, it is disappointing that lenders are adding to the panic."
The effect of the credit crunch means that 100% deals are also becoming harder to find, according to Moneyfacts.co.uk.
Analyst Julia Harris said that the market for this type of product had shrunk as well, with 28 of the 123 prime mortgage lenders offering 100% mortgages, compared with 41 in November.
"This is yet another example of lenders continuing to tighten their belts even further in what has become a vastly different mortgage market from this time last year," she said.
The sensitivities and controversy around the 100%-plus mortgages could lead Northern Rock to leave the market when under public ownership, according to mortgage broker Ray Boulger.
But he added that the success of the Rock's Together mortgage deal meant there was "no reason" it should pull out.