100% mortgages hit the headlines again

08-Oct-2007

Prospective homeowners looking for a first time buyer mortgage have again been warned over the possibility of negative equity were they to take out a high loan to value mortgage.

Last week Halifax reported that house prices fell by 0.6 per cent in September, ending a long run of price increases seen over the past few years. The report was contradicted by Nationwide's own price index but seemed to confirm the findings of Rightmove's study, issued last month, which found that prices fell by 2.6 per cent.

Whatever the true figure, what is certain is that price rises are at the very best slowing considerably, and with lenders continuing to provide ever-more innovative ways of helping buyers purchase their first property, warnings over negative equity have now taken hold.

Fool.co.uk has said that five per cent of first time buyers could be at risk of being unable to sell their home – because their mortgage is worth more than their property – if prices do indeed begin to fall.

The website suggests that the best first mortgage for those committed to high LTV deals would be a repayment mortgage, rather than an interest-only deal which carries with it the risk of never being paid off.

"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," noted David Kuo, head of personal finance at Fool.co.uk.

"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," Mr Kuo added.


First time buyer income multiples reach new high

http://www.firstrungnow.com/first-time-buyer-news/first-time-buyer-income-3523.aspx

Money matters playing on minds of first time buyers
http://www.firstrungnow.com/first-time-buyer-news/money-matters-playing-3504.aspx

2008: May | Apr | Mar | Feb | Jan

2007: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2006: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2005: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar