Abbey explains mortgage letter

Date:Monday 15th December 2008
Author: Max Freedman

Mortgage lender Abbey has given an explanation for a letter it sent to some flexible mortgage borrowers.

It had written to customers explaining that falling house prices could affect their mortgage contracts and warned they could borrow only up to 90 per cent of their property value.

The lender said that the terms of a flexible deal meant that if the borrower's home value fell so that the mortgage was worth more than 90 per cent, they could have to pay a lump sum.

Abbey says that it does not plan to use this clause but has not ruled out the possibility.

Meanwhile, Which? has warned consumers to think carefully before terminating a mortgage payment protection insurance (MPPI) policy.

Personal finance campaigner at the consumer group, Vera Cottrell, told the Guardian that while the government's new scheme will postpone interest payments fro two years, MPPI "will not only pay the interest for you for a year or more, but will also pay any capital repayments you make as well".