24dash.com v2 beta Mortgage lenders scrap 125% home loans Housing 24dash.com

At the same time the number of lenders offering 100% mortgages has fallen by nearly a third in recent weeks. Mortgages offering 100% of a property’s value are popular with first-time buyers as they remove the need to save for a deposit, while loans that will advance up to 125% enable people to put the extra cash towards solicitors’ fees and stamp duty, as well as buying furniture.

But the deals have come in for heavy criticism, with some commentators arguing that they encourage people to borrow more than they need. At the same time, 100% mortgages make people vulnerable to negative equity, as any slight downturn in house prices will leave them owing more than their property is worth, while with 125% loans people are already in this position from day one.

It is thought that around 250,000 homeowners are currently on one of the loans, but Mr Boulger said they were unlikely to face problems remortgaging when their deals run out. He said although the products offered to lend up to 125% of a property’s value, in reality most people borrowed around 104% to 105%.

He said as a result of house price appreciation during the past couple of years, despite the recent price falls, as well as repayments reducing the amount owed, most people were likely to need to borrow 100% or less of their home’s value when they came to remortgage. Birmingham Midshires also said it was looking into offering a product for its existing borrowers coming to the end of these deals.