The last 100% mortgage which was still on the market was removed from Abbey’s offerings on the 7th of April at 10pm. This marked the end of the no-deposit mortgage era. Abbey is responsible for 1 in 10 mortgages in the UK and the bank said that these moves were both in line with current market trends and similar to moves made by other lenders. One year ago 158 mortgages were available for first-time buyers who had no deposit, today there are none.
This signals the end of the mortgage market surge which had helped to fuel the housing boom and as the house prices fall and mortgage products are withdrawn the future for property jarringly uncertain.
The average property now costs approximately £200,000 which means first time buyers will have to save up a deposit of at least £10,000 in order to stand a chance of getting onto the property ladder. The Telegraph have reported that: “Borrowers who took out a 100 per cent deal in recent years will also be hit when they come to the end of their mortgage. Instead of shopping around for a new, competitive deal, they will be forced to stay with their existing lender. In many cases they will have to pay their lenders [the] expensive standard variable rate (SVR).”
The only 2 lenders offering products which are at all similar to the 100% deals are Bristol and West and The Bank of Ireland but in these cases mortgage applicants must enter into a contract which involves joint application of their parents, effectively securing the new home loan on their parent’s property. Other action which Abbey intends to take due to the credit crisis is to increase its tracker rates by up to 0.35 per cent and cut its offset deals down from £7.5 million to £550,000.
The Times Online has a facility for readers to post comments on the website, one such comment was posted regarding the end of 100% mortgages. “About 12 months ago a major lender increased the limit to 5 times annual salary for each person, so a couple could borrow 10 times one salary. This was purely to increase sales because they were slowing. I thought at the time, what's the point?” A reader wrote.
The reader who was listed as ‘Jon, Eastbourne’ went on to say: “It's easy to criticise the borrowers... But these ridiculous mortgage products have been pushed on the public by people we are supposed to trust!” Public opinions on online forums concur that the end of 100% mortgages while shocking to some will be a positive change and will make the market more realistic and properties therefore more attainable.
Some lenders such as First Direct have withdrawn from the mortgage market completely. First direct have said the action is due to a backlog of existing mortgages which need to be assessed and dealt with. The Co-op Bank which has 6.5 million customers has also said that they will temporarily stop taking mortgage applications.
Most buyers considering a mortgage are being advised to wait until the market is less tumultuous but fears are high that the good deals are all drying up.
