Sky News business editor Michael Wilson

Finally the turn of the last leading lender to put the squeeze on.

Abbey, Britain's third biggest, has abandoned its 100% mortgages. Borrowers will now need to find 5% of the value of the property they want to buy, with arrangement fees and stamp duty on top.

If that wasn't bad enough for first time buyers, along comes Halifax, the UK's biggest mortgage lender, with a grimmer prediction for house prices that anyone had expected, that house prices fell 2.5% in March. It's the largest fall since the last housing market crash. Halifax now predicts a gentle fall for the rest of the year.

Apart from the difficulty of getting a toehold in the housing market, this also spells trouble for homeowners who've taken out a 100% mortgage over the past few years, but not managed to establish between 5% and 10% equity in their property. Their next mortgage deal will be much more expensive. Perhaps prohibitively so.

Even worse, if the value of the property falls and the homeowner has made no dent in the 100% mortgage, negative equity looms, and as we've noted before, we'd prefer not to revisit that.

The predicted fall may well strengthen hopes for an interest rate cut to 5% on Thursday -  but I fail to see how it will bring down mortgage rates.

We need first aid for first time buyers. Any suggestions, anyone?

Comments

[kelly 10 Apr 2008 11:21:13]

lets face it we will end up with record levels of reposessions because the average joe on the street who earns say £17000.00 per year cant a buy his own property without the bank of mum and dad giving them a massive deposit. traditionally people would borrow three times there salary what would £51000.00 buy now even with a good deposit i live in a three bed end terrace house thats worth £99995.00 in an area that is where average joe lives and first time buyers are priced out of market so we are back to the days where working class people never own there own home unless they can buy from the council and thats if they can get a council house. my husband and i have already decided that we will sell are home when are two children are old enough to buy there own property and we will rent somewhere just so they are able to buy there own place as useual working class has to stuggle to there dying day.

[Khalid 8 Apr 2008 14:14:21]

Sir
One of the fundamental and most distressing of purchase ironically has a financial link to such bricks and mortar.
As a would be buyer, my ultimate dsire is to ensure that neother Abbey or any other lender out stays their welcome thus far as the deeds of the house are concerned and that I re-pay enough so as to own at least a thrid of the property makming it neigh on impossibe for the lender pursuant to the Cnsumer Credit Act 1974 to either commence re-possesion let alone think about it.
Lord Burns' move towards a deposit based mortgage will not only be beneficial to both bank and customer, but further educate many a buyer insofar as long term commitments, as unfortnately many a dream fades thereafter. Insofar as the solution to the interim, no doubt low level rent will assist with the provision of pending deposit, whilst consumer with good credit rating will be able to benefit form other such financial incentives that will emerge as the year unfolds.
So, (1) Lord Burns let rock.
& (2) Your Home May Be At Risk If You Do Not keep Up With Your Financial Commitments).
By the way My Lord, dont suppose you have mastered the art of opening e-mail yet have you? Oh look theres an invoice from>>>>>>> 7 days and counting, 1,2,3....oops nearly forgot to make my [Nightwish] and dream of my [High Hopes]!

[Elizabeth Davies Cape Town 8 Apr 2008 12:17:22]

Perhaps the only answer to buying a first time home is to rent a council house or flat for 20 years and then buy it at a discount from the council, history may repeat itself, Mrs Thatcher was on to something good there.
The new homes could be constructed the way prefabricated houses were after the war, they stood for years, they were well built, again a good solution to problem.
Work the problem people!