Borrowers struggle to obtain a 125% mortgage deal

20/02/2008

A vast majority of lenders yesterday changed their criteria on mortgage deals which has made it difficult for home buyers, to borrow 125% of the property value.

Banks and building societies are tightening their lending rules simply due to the credit crunch and the housing market depreciation.

Only a few years ago, home loans which allowed people to borrow more than the value of the property have showen particularly popular with first-time buyers, however they have been cited by debt charities for irresponsible lending.

Director at Savills Private Finance, Melanie Bien, commented: "The death knell for 125% loan-to-value (LTV) mortgage products was sounded when the government nationalised Northern Rock.

How can the government be seen to encourage borrowers to take on such high LTVs."

Alliance & Leicester confirmed it was taking out its PlusMortgage panel due to "market status", while the Coventry confirmed that applications for its product, called moregage, "have decreased to a certain level, and it can not no longer be cost-effective to settle the additional underwriting processes for higher loans".

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