Money News
Confirmation by the Abbey that it's withdrawing its 100% mortgage deals from the market effectively means the end of the market for 100% mortgages, for now.
The withdrawal, until further notice, reflects current market conditions, given the ongoing credit/mortgage crunch; and recent moves by the bank's competitors.
Twelve months ago there were more than one hundred 100% mortgage deals available. Since then the credit crunch has reared its ugly head. As a consequence the withdrawal of mortgage deals from the sub-prime market has now spread into the more credit worthy prime residential loans market.
Abbey's move follows the Halifax's initiative earlier this week that will see new Halifax borrowers unable to cough up a 25% deposit having to pay more for their loans. Those prepared to put down 25% or more will benefit, however.
In the Halifax's case the maximum loan-to-value (LTV) offer will be 95% - down from 97%. That said, 97% deals will still be available in branches, but you'll have to pay 0.35% more.
Across Halifax's mortgage product range the interest rate on loans with a deposit of less than 25% will rise by an average of 0.14%. Halifax claims 70% of its new customers put down a deposit of more than 25%.
The changes will also be adopted across the Bank of Scotland and Intelligent Finance mortgage brands and apply to new mortgages, not the Halifax's 2.5 million existing customers.
Meanwhile, The Council of Mortgage Lenders (CML) says the popularity of tracker rate mortgages increased in February as the proportion of borrowers choosing fixed-rate loans fell to 52%, its lowest level since March 2005.
The proportion of borrowers choosing tracker-rate loans increased to 35%, from 33% in January and 14% in February last year. Floating rate products have become increasingly attractive compared with fixed-rates as consumers expect further Bank base rate reductions in the coming months.
These mortgage figures typically relate to applications taken out several months ago, and do not reflect the shrinking availability of mortgage products and re-pricing which has been a feature of the market in recent weeks.
First-time buyers in February typically borrowed 88% of the property's value, unchanged from January, and 3.33 times their income, compared with 3.32 in January. Home movers typically borrowed 71% of the property's value, up from 70% in January, and 2.97 times their income, unchanged from January.
Mortgage lending activity in February remained subdued. Gross lending totalled £25 billion, down 3.5% from £25.9 billion in January and 2.3% from £26.6 billion in February last year.
Loans for house purchase declined in volume to 49,000, down 3.5% from 50,900 in January, and by 5.1% in value to £7.5 billion. The number of loans for house purchase has been more than 30% lower than a year ago for the last three months, and this picture of year on year declines will likely continue throughout 2008, says the CML.
Elsewhere, remortgaging made up 45% of all lending in February - unchanged from January and the highest share since March 2005. Remortgaging activity is likely to remain relatively strong, and will likely represent a higher percentage of all lending for the rest of the year, given the wave of borrowers due to come off fixed and discounted rates in 2008, says the industry body.
08 April 2008 © Moneyextra.com
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