Lenders announce withdrawal of 125% mortgages
According to recent reports a number of lenders have taken mortgages of over 100% off the market, as an increasing number of lenders exercise caution over lending levels in light of the global credit crunch. The shrinking market for mortgages of more than 100% means that many consumers may suffer, including those looking to take out a mortgage in excess of 100% and those who already have mortgages of over 100% who want to remortgage.
This week along a number of lenders have announced that they are taking 125% mortgages off the market, including the Abbey and the Alliance and Leicester. With so many major lenders now refusing to offer this type of mortgage a number of consumers could run into difficulties. In the past 125% mortgages have proven popular amongst first time buyers, who have used the additional cash for things such as carrying out home improvements, furnishing the property, and decorating their new home.
With a 125% mortgage there is a secured mortgage element that makes up 95% of the loan, and the remaining 30% comes in the form of an unsecured loan for up to £25,000 – £30,000. Those with 135% mortgages who are looking to remortgage in the future could face severe difficulties as a result of the reduced number of mortgages of this nature that are available. Most will only be able to remortgage the 95% mortgage element of the loan, leaving them lumbered with a large unsecured loan that will go against them when looking for a competitive deal on a remortgage.
One industry professional said: “With so many prominent lenders exiting the 100%-plus mortgage market this week, consumer confidence is going to be knocked again. First-time buyers will be hit hardest, with repayments likely to shoot up when they come to remortgage. At a time when consumer confidence is so low, it is disappointing that lenders are adding to the panic.”
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