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100% Mortgages Are Back – Good News or Bad?

Written by Sam Jones on 10 September 2012.

Capital Fortune has today announced their inability to support the provision of a new 100% mortgage announced today.

The scheme is based upon a multinational lender providing a 75% mortgage secured on the property backed up by a 25% unsecured loan from another provider. The arrangement appears to require no deposit or financial capital commitment from the borrower.

The Company appreciates that the products may be helpful to some clients struggling to get onto the property ladder but has concern that these products, do pose a significant risk.

Whilst, useful to some, there is a real issue that if potential borrowers are unable to save even a small deposit, (given there are 95 percent mortgages already available), then these same borrowers are more likely to struggle with meeting long term repayments on a mortgage, given nothing has ever been put aside for a rainy day, particularly as rates start to rise.

As Brokers, we appreciate our job is to help people secure finance, but if there is anty risk that finance is not sustainable in the longer term, that can only ever be to the detriment of the borrower. This type of product does cause us concern.

The loans appear available up to £100,000 per couple. They are for a maximum period of 15 years and there is an indication that if one party has had adverse credit, the application can still proceed in the name of the other applicant, subject to affordability.

Rob Killeen, Business Manager commenting on the news, stated that ” We appreciate that increasing options for clients is never be a bad thing and we welcome all further introductions of innovative solutions. We do however, have concern regarding this type of product. Whilst our concerns may be deemed misguided, we do not feel 100% mortgages,particularly at this stage of the economic cycle, feels unsafe for our customers”.

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