Mortgages Uncovered

Over the last few months many lenders have been pulling their highest loan-to-value mortgages and yesterday, Northern Rock scrapped its Together Mortgages range, the range that allowed borrowers to take a mortgage worth 125% of the house value.

When 100% mortgages were first introduced, there was all sort of criticism launched and talk of negative equity but gradually more and more mortgage lenders entered the market.  However, as house prices continued to rocket and negative equity didn’t seem to be an issue, it was only a short time later that lenders were offering 110% and even up to 130% of the value to help people buy a home and give them spare cash to either consolidate other debts or to make home improvements.

Times have changed though and even though we have yet to see a definite downturn in house prices, I think most people would agree that prices appear to have stabilised in most areas of the UK.  That being the case, if you were to now borrow a 125% mortgage or even a 100% mortgage, you may find yourself in negative equity for a very long time.

I think it will be a good thing for all 100% mortgages to be removed from the market.  That might be difficult for many first time buyer, with whom I sympathise, but it’s better than being overjoyed at buying your house only to realise that you’ve mortgaged yourself into your own personal prison.