The return of the 100% mortgage
Monday, 05 September 2011 03:41
Aldermore Bank has become the first lender to offer a 100 per cent loan-to-value (LTV) mortgage deal since the widespread removal of this type of credit during the financial crisis.
The small bank, which was launched in 2009, will allow homebuyers to borrow the full amount of a property's purchase price, without putting down a cash deposit.
However, the condition attached to the loan is that a guarantor, such as a parent, grandparent or guardian, must be willing to support it for ten years.
This needs 25 per cent of the mortgage to be secured through a charge on that individual's own property.
No money needs to be provided up front, but in the event of repossession, they would be liable for any shortfall of the sale of the house.
High LTV mortgages were very common before the onset of the financial crisis, but lenders withdrew them rapidly when house prices crashed in 2009.
Charles Haresnape, managing director of residential mortgages at the bank, said the deal makes sense because prices are significantly lower than they were three years ago.
"We are in a very different point in the economic cycle in terms of house prices," he explained. "The problem in the past was that these loans were offered at the top of the market on very relaxed terms."
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