The market for 125% mortgages appears to be dead in the water after the last high street lender pulled out of offering the deals.

Birmingham Midshires Solutions has withdrawn its version of the product as it tightens its criteria in the wake of the credit crunch.

The group had been the only provider left in the sector after Alliance & Leicester, Abbey, Northern Rock, Coventry Building Society and Godiva Mortgages all scrapped the products recently.

Firms are trying to concentrate on less risky products amid fears property prices could fall, leaving new homebuyers with negative equity.

Problems in money markets have also seen financial institutions reign in their lending habits, which meant mortgage firms had fewer funds to lend to residential property buyers.

Ray Boulger, senior technical manager at John Charcol, said: "Lenders have limited availability of funds and they have been cutting back on the high-risk mortgages."

There are now just two mortgage providers who will advance more than 100% of a property's value, with Scottish Widows offering loans of 110% to professionals only, while Dunfermline Building Society is offering 110% to professionals and 105% to graduates but only in Scotland.

Mortgages offering 100% of a home's value are popular with first-time buyers as they remove the need for a deposit.

Home loans for 125% of the value also let people use the extra cash towards solicitors' fees and stamp duty, as well as refurbishments and new furniture.

But some commentators have attacked the deals because they can encourage people to borrow more than they really need.

There are currently an estimated 250,000 homeowners on one of the loans, but although the products offer up to 125% of a property's value, most people only take out around 104% to 105%.

Analyst Julia Harris said: "It's not just 125% deals that are being pulled, 100% deals are also becoming more expensive and much harder to find.

"This is yet another example of lenders continuing to tighten their belts even further in what has become a vastly different mortgage market from this time last year."

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