First-time buyers 'could be tied to their home by their mortgage'
Published On 8 October 2007
Some first-time buyers who took out 100 per cent mortgages to get on the property ladder could find themselves imprisoned in their homes if house prices stagnate, a leading lender has warned.Recently, Halifax said that house prices fell in September for the first time in nine months.
Now, website fool.co.uk has reported that people who recently took out 100 per cent mortgages could face a situation where they find themselves in negative equity.
The website estimates that around one in twenty first-time-buyers take out these mortgages to get on the property ladder.
"Borrowers on 100 per cent mortgages need to be aware that stagnant house prices may keep them shackled to their uncompetitive lender and prisoners in their own home until house prices rise again," David Kuo, head of personal finance at the site, warned.
"However, they can tip the scale in their favour by ensuring that they choose repayment mortgages rather than the cheaper interest-only options.
"They should also overpay their mortgage as often as they can afford. This will ensure that they are regularly chipping away at their debt. And with more equity in their homes, their choice of mortgage providers improves too."
Recently, Stephen Karle, chief executive of West Bromwich Building Society, said that it was still possible to find competitive mortgage deals, but that consumers had to search for the best offers.
