…By Judah Olanisebee for TDPel Media.
The Return of the 100% Mortgage: Cause for Concern or Opportunity?
It’s natural to feel uneasy when reading about the “return of the 100% mortgage” given the havoc wrought by reckless lending in the past.
However, it’s important to note that the current economic climate presents different challenges and that the new 100% LTV product from Skipton building society has some attractive features.
The Risks of 100% Mortgages The financial crisis of the Noughties was fueled in part by irresponsible “zero deposit” lending, so concerns about the risks of 100% mortgages are understandable.
Negative equity has been a problem in the past, and could be a risk in the future, but it’s not necessarily catastrophic.
The Skipton Solution Skipton’s 100% LTV product is aimed at renters who struggle to save for large deposits, particularly in London where rents and house prices remain high.
Applicants will need to demonstrate a history of timely rent payments and the mortgage repayments will not exceed their previous rent payments.
While the idea of a 100% mortgage may seem alarming at first glance, Skipton’s product is tailored to address the specific challenges faced by renters in expensive housing markets.
The requirement for a track record of timely rent payments provides a level of assurance about the borrower’s ability to handle debt.
It’s important to note that negative equity, while not ideal, is not necessarily a disaster.
The current employment situation in Britain is stable, which means that most homeowners should be able to ride out any short-term negative equity and eventually restore their equity through capital repayment.
Conclusion
The return of the 100% mortgage is not inherently bad, but it’s important to carefully consider the risks and benefits of any financial product.
Skipton’s 100% LTV product offers a potential solution for renters struggling to save for deposits, but borrowers should be aware of the possibility of negative equity and plan accordingly.