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April 8, 2008    

Abbey withdraws 100% mortgages

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by Gill Montia
”Abbey

Abbey, the Spanish owned bank and the last remaining leading lender to offer 100% mortgages, is withdrawing its 100% range from the market from Wednesday.

Meanwhile, other lenders continue to cap their maximum loan-to-value ratios, putting even 95% mortgages under threat.

Cheltenham & Gloucester, Alliance & Leicester and Britannia now offer maximum loans of 90% and yesterday, Halifax reduced its maximum loan from 97% to 95%.

The trend leaves first-time buyers in need of a minimum 5% deposit to obtain a mortgage.

For those taking a first step on the property ladder, the average cost of a home is £148,000, requiring a deposit of almost £7,500.

With the average UK house price at around £186,000, existing homeowners will need a deposit of at least £9,300.

This could leave those coming to the end of 100% fixed-rate loans in difficulty when remortgaging, if they have not built-up 5% of equity in their homes.

Such borrowers could be forced to pay their lenders’ standard variable rates which currently average 7.5%.

Abbey, which is the UK’s third-biggest mortgage lender, introduced its 100% mortgage range in spring of last year.

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