Page last updated at 16:46 GMT, Monday, 7 April 2008 17:46 UK

Abbey pulls last 100% mortgages

People browsing an estate agent's window
Mortgage deals are becoming more expensive by the day

The Abbey bank is withdrawing the last 100% mortgage deals currently available to UK borrowers.

The offers will cease on Wednesday 9 April, so customers who have submitted applications will still be able to have them processed in time.

The bank's decision completes a trend which started in February when lenders, including Northern Rock, withdrew their 125% mortgage deals.

Now, all lenders require borrowers to put down a deposit for their homes.

'Market conditions'

The only lender with a loan still resembling a 100% mortgage is the Bristol & West, part of the Bank of Ireland, but its deal involves parents giving a guarantee for their children who are taking out the mortgage.

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

"We are withdrawing our 100% loan to value mortgage until further notice," said an Abbey spokeswoman.

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

She said that, like other lenders, they were having to deal with customers scouring the market for mortgages at a time when the credit crunch has made it difficult for lenders to meet demand.

"Abbey is seeing high demand following recent competitor moves," she added.

"In order to maintain high service levels on the business it writes, it is simplifying its mortgage range and re-pricing in some areas."

Scarcity

The mortgage market has changed dramatically in the past two months, as lenders have found it hard to raise funds in the financial markets to keep their mortgage lending going at previous levels.

Even 95% loans are now becoming scarce or more expensive
Aaron Strutt, Chase de Vere

According to the financial information service Moneyfacts, the huge shrinkage in the number of sub-prime and buy-to-let mortgages triggered by the credit crunch and the Northern Rock crash has now filtered into the market for ordinary residential home loans.

There are 2,058 of them currently, compared to 3,370 in April 2007.

"There were 104 deals at 100% a year ago, so that market has now gone to nothing" said Moneyfacts' Andrew Hagger

Aaron Strutt, from the mortgage brokers Chase de Vere, predicted that within weeks deposits of 10-15% would become the norm.

"The Abbey's 100% rates were so expensive compared to where they used to be, you would have had to really need the money to take the deal," he said.

"Even 95% loans are now becoming scarce or more expensive."

Last Friday the Halifax, another major lender, decided to impose a minimum 5% deposit on new borrowers.

It also changed its range so that the best deals are now available only to those who can put down a deposit of 25% or more.




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