A number of well known lenders have now announced that they will no longer offer these super-size mortgages, with the Abbey, the Alliance & Leicester, and more recently Northern Rock, all taking their 125% mortgage products off the shelves. Although these loans have received criticism in the past for sinking people in to deep levels of debt very quickly, this decision to remove these loans from the market could spell bad news for financial strapped first time buyers and those on low incomes or with no savings.
The withdrawals of these 125% mortgages could make things even more difficult for many first time buyers, taking away their ability to get onto the property ladder due to high property prices, crippling additional costs, and no equity from any previous property to help them with their purchase.
With these mortgage loans 95% of the loan covers the actual mortgage and the other 30% is offered as an unsecured loan. This means that those currently on these deals who need to remortgage may only be able to refinance the mortgage part of the loan, and may experience further difficulties because they will be classed as having a huge unsecured debt into the bargain.
With the global credit crunch causing chaos in the financial markets, it is likely that an increasing number of lenders will follow suit in taking these mortgages off the shelves. Many lenders have also stopped offering 100% mortgage loans â only one in ten lenders now offer 100% mortgages whereas at the end of last year around one third of lenders offered them.
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Source: http://www.articlealley.com/article_484687_19.html
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