100% loans can be costly
Published On 2 November 2006
A leading financial expert has warned buyers that committing to a 100 per cent mortgage or more could lead to potential disaster.Julia Harris, a mortgage analyst at moneyfacts.co.uk, claims that there are currently over 200 lenders who provide 100 per cent mortgage deals.
However, in recent times, a small market has grown for mortgages in excess of 100 per cent, with five firms offering mortgages with LTVs of between 102 per cent and 125 per cent.
"If you were unable to accumulate any savings before stepping on the property ladder, then committing to this long term, high monthly repayment may be one expense too far," Ms Harris explains.
Home improvements are generally cited as the main reason for mortgages in excess of 100 per cent, although holidays and other non house-related purchases are also proving popular.
She adds that with so few lenders offering deals, "the interest rates available are far from competitive."
The news comes at a time when many financial commentators are warning that debt in the UK is getting out of control.
