The 100 per cent mortgage set to be outlawed

The era of the 100 per cent mortgage could be at an end after Gordon Brown announced plans to ban the risky loans as part of a major review of banking practices.

The Prime Minister has asked the Financial Services Authority to consider outlawing 100 per cent-plus loans, and called for banks to return to traditional values of responsibility.

He said a balance had to be struck between reckless lending to sub-prime customers and encouraging people on to the housing ladder. The move would see first-time buyers forced to save longer for a deposit, but would end the mortgage free-for-all which saw loans of 125 per cent of the value of homes being made available.

The move will help stabilise the economy as Britain battles with the recession, Downing Street said.

Sub-prime loans have disappeared with the banking crisis but the Government fears they could creep back into the financial sector. The burst of activity follows a week in which leadership speculation ran out of control in Westminster, with no fewer than nine cabinet ministers tipped as potential successors to Mr Brown in a leadership contest after the election.

Mr Brown has tried to get his party to concentrate on its common enemy, with Alastair Campbell giving a speech to Labour Party workers last Tuesday on how to beat Conservative leader, David Cameron, at the election.

Mr Campbell, Tony Blair’s former press secretary, has returned to help Mr Brown in recent months.

The Prime Minister will host his third cabinet meeting outside London tomorrow as part of his continuing attempts to reassure voters that ministers understand their concerns about the recession.