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Will 100% Mortgages Return?

Building Societies Association calls for lenders to bring back 100% mortgages

Friday 23 November, 2018

Thomas Oliver’s Hertfordshire Mortgage Brokers and protection specialists, Vishal Gulrajani and Thomas Wheatley review the possibility of 100% mortgages being re-introduced for first time buyers.  

In previous articles Thomas Wheatley and Vishal Gulrajani have discussed how the government is trying to help first time buyers with stamp duty incentives. The government is also making it less attractive for investors to own second properties due to tax changes and increased stamp duty provisions. However, we have seen with our own clients that first time buyers sometimes find it difficult to save enough deposit for their new home. 

In a previous article – New mortgage products for family members assisting with a mortgage purchase, we discuss the bank of mum and dad. Family members are normally the biggest lenders helping first time buyers get on the property ladder. However, not everyone is fortunate enough to have parents in this position, which has led to the Building Societies Association to call for lenders to bring back 100% mortgages.

According to Samantha Taylor of Buy Association, first time buyers do need help and as many as 59% of young homebuyers need parental assistance to purchase their first home. Nevertheless people will be very hesitant about taking out a mortgage with no deposit because they remember the 2008 financial crash when we saw the problems created by Northern Rock’s 125% mortgages. The financial crisis led to the whole re-regulation of the mortgage market, so if 100% mortgages do re-appear it is likely that higher rates would be charged for these products. This will put more pressure on borrowers and could increase the possibility of them defaulting. 

Vishal Gulrajani, Mortgage Broker in Goff’s Oak & Cheshunt, Hertfordshire said:

‘Despite the likelihood that 100% mortgages could be re-introduced with higher mortgage rates I am still in favour of their re-introduction because of high house prices. We need to make sure that we have learnt from the mistakes of 2008 and give 100% mortgages not 125% mortgages, especially when house prices are stable. We should also consider the jobs people do so we only give 100% mortgages to people working in certain professions. For example qualified occupations where career progression and salary increases are guaranteed. By doing this you should negate some of the risks and lenders could also introduce provisions for overpayments.’

Thomas Wheatley, Mortgage Broker in Tottenham, North London said:

‘Overall we wouldn’t be surprised to see 100% mortgages being offered in the mortgage market again, but we would fully expect these products to be on higher interest rates and to be limited to certain professions. From the point of view of the lenders risk this mortgage should only make up a small percentage of their overall mortgage book. The fact this is already being looked at by some lenders shows the greater need to help first time buyers to get on the property ladder. We would encourage any first time buyer who is looking to purchase their first home to get mortgage advice as early as possible. If you contact the Thomas Oliver mortgage broking team on 01707 872000 we will be able to advise you on the most suitable mortgage for your personal circumstances. If 100% mortgages are available we would be able to determine whether these mortgages would be suitable for you.’

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