Abbey bars customers without 25% deposit from tracker deals DESPITE £50billion cash injection from Darling

Britain's second biggest mortgage lender barred cash-strapped homeowners from some of its most popular loans yesterday.

The move by Abbey came despite the £50billion lifeline extended by the Bank of England to help banks and building societies through the credit crunch.

At the same time rival RBS was preparing a rights issue to shore up its own finances after being forced to unveil nearly £6 billion in write-downs.

Last night a senior banking source warned it could take up to 18 months for the benefits of the cash injection to feed through to homeowners, as lenders remain reluctant to take risks.

In a Commons statement, Chancellor Alistair Darling assured MPs the £50billion would help "business, individuals and in particular the mortgage market".

But Mervyn King, the Bank of England governor, appeared to encourage further falls in property prices.

He said: "There needs to be some adjustment in the housing market and this scheme is not designed to impede that adjustment."

The eventual cost of the lifeline for lenders could pass £100billion, experts said.

The Bank said the scheme will 'initially' hand out around £50billion, but there is no cap on how much money will be used.

Mr King denied the scheme amounted to a taxpayer-funded bailout for banks, saying he had acted to protect the wider economy.

He argued that the hefty fees that lenders will have to pay the Bank in exchange for offloading their mortgage debt would protect the taxpayer.

He said: "The objective in this scheme is not to protect the banks, it is to protect the public from the banks."

By allowing banks to exchange their mortgage-backed securities for more reliable Government bonds, the Treasury hopes banks and building societies will be able to start offering more cheap mortgage deals.

But Abbey actually moved in the opposite direction yesterday.

From today, it will be impossible to get a tracker mortgage with Abbey unless you are borrowing 75 per cent or less of the property's value.

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Before the rules were introduced, it was possible to borrow up to 95 per cent. Abbey has also introduced more expensive fixed rate deals for those who only have a deposit of 25 per cent or less, increasing its rates by up to 0.61 percentage points.

A two-year fixed rate at 5.99 per cent yesterday will jump to 6.6 per cent if you are borrowing 90 per cent of the home's value.

For somebody with the average mortgage of £158,100, the change will add more than £700 to the annual repayments.

If you have a 25 per cent deposit, you can still pay the 5.99 per cent rate.

Northern Rock cut its standard variable rate by 0.1 percentage points yesterday.

At 7.49 per cent, its standard variable rate is the most expensive charged by any of the top ten lenders. The cheapest rate comes from Nationwide at 6.49 per cent.