More people reliant on one hundred percent mortgages

Recent figures have shown that more and more people have become reliant on 100% mortgages over the past year, as property prices in the UK have soared, leaving many property purchasers with no other option that to opt for a mortgage loan of the same value as the property that they are buying.

One hundred percent mortgages are normally made available to first time buyers without any credit problems, and it seems that many first time buyers are taking the plunge in order to get onto the property ladder.

Property prices in the UK have been soaring over recent years, and this has made it difficult for first time buyers to afford a deposit or to get a mortgage for the amount that they need. To accommodate these issues lenders have been changing their lending policies, and in addition to one hundred percent mortgages some now offer higher income multiples and far longer repayment terms, with one lender offering a mortgage term of nearly sixty years in order to keep repayments down.

According to figures compiled by the Mortgage Advice Bureau there was a twenty one percent rise in the number of people taking out one hundred percent mortgages last year. In addition to this, some people are taking out mortgage loans worth more than the value of their property, and figures indicate that those borrowing more than the value of their homes rose by half last year.

With longer mortgage terms, higher loan values, and with some people going into negative equity right away by borrowing more than the value of their home, many first time buyers could be heading towards decades of debt and risking a lot to get onto the property ladder. However, one mortgage brokers said that this sort of debt has become more and more accepted.

He stated: "As the proportion of people going to university has grown over the last few years, as indeed has the level of fees that they pay, we have seen a new generation of young people starting their working lives much later, often saddled with thousands of pounds worth of debt. Faced with the choice of either delaying a house purchase until the debt has been paid off and a new savings pot accumulated, or taking the plunge earlier with the aid of 100 per cent plus home loans, it is unsurprising that greater numbers have more recently chosen the latter."

Tom Smith
01.03.07

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External Links:

Council of Mortgage Lenders