Abbey takes final 100% mortgage from market

Abbey has announced it will drop the last 100 per cent mortgage from the UK market, following the trend set by a cavalcade of lenders who have restricted lending.

Mortgages covering the full value of a property started to disappear from the market in February, and all deals are now off.

This means first-time buyers need to raise a deposit of at least five per cent to get on the property ladder.

Research released today by the country's biggest mortgage lender, Halifax, finds 82 per cent of all new borrowers put down a deposit of more than ten per cent of the house price during the final quarter of 2007.

In contrast, 56 per cent of new borrowers put down a deposit of more than ten per cent in 1989 and 1990.

Only Bristol and West still 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 mortgages on the market.

Abbey will stop offering its 100 per cent deal tomorrow.

Fears are now rife in the market 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.

The Bank has cut rates twice in recent months, by 0.25 per cent in December and February to 5.25 per cent.

Research by online mortgage company mform.co.uk 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 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.

"Potential borrowers need to be careful now more than ever to take into account the impact of fees on their mortgage in order to make sure that they have a clear idea of the true cost of their mortgage."

He added: "It is good to see Halifax launching deals for first-time buyers and emphasising its commitment to them. However, even its deals involve better rates for those with bigger deposits."