It has been reported that Abbey wrote to borrowers at 90% LTV and above asking them to make significant overpayments to their mortgages.
This was attributed to falling house prices which meant that customers had borrowed more than their home was worth.
Though the lender admits it has written to 4% of its flexible mortgage customers, Abbey says the letter did not call on home owners to overpay.
A statement from the lender says: “Abbey operates a policy of regularly reviewing the available balances on our flexible mortgage book in line with house prices to ensure that the mortgage balance and funds available do not exceed 90% LTV.
“Where it does, we reserve the right – as clearly stated in the terms and conditions of the mortgage – to withdraw any available balance over the 90% LTV limit which is not being used.”
Abbey argues that given the extent of house price falls over the last year this policy protects consumers from ending up in negative equity.
Another clause within Abbey’s flexible mortgage contract allows the lender to demand payments from home owners who are drawing on 90% of their home’s equity within three months.
The Abbey statement adds: “We have not invoked this particular clause and have no intention to.
“But in a falling house price environment it is prudent for customers on flexible deals who find themselves at over 90% LTV to look at whether they can afford any overpayments, especially as they will have seen rate decreases over the last few months.
“If they can pay off some capital to bring their LTV down, we would encourage them to do so.”