One hundred per cent and beyond

Abbey entered the 100% plus mortgage market this week - a shock move when you consider that other lenders are tightening lending criteria in the face to the credit crunch.. With Abbey, those struggling with affordability can borrow 100% of the property's value plus up to 25% in the form of a secured loan on the proviso that the secured loan element does not exceed £25,000.

Abbey pushes boat out in spite of storm

At the moment the deal is in its pilot stage and is only available through a handful of mortgage brokers. For properties costing £125,000 or less, the deal is effectively a 125% Loan to Value (LTV), which is deemed as high risk lending by the industry, especially in turbulent times. Researcher at Moneyfacts, Julia Harris says it is a surprising time for Abbey to announce a range of products designed for borrowers looking to finance up to 125% of their property value. "These loans can be a perfect solution for some borrowers, but should be taken with a wealth warning," she says. Their success relies on a bouyant property market. Borrowers should not forget they are spreading the cost of their additional borrowing over a long period of time and therefore accumulating a hefty interest bill."

Clambering onto the foot onto the first rung of the housing ladder? Moneyextra can help you compare all UK first time buyer mortgage deals to find you the best rate.

One hundred per cent with a twist

Abbey joins Alliance & Leicester, Birmingham Midshires, Coventry Building Society (through Godiva Mortgages) and Northern Rock to offer 125% LTV products, but is unique in the fact that the full 125% is secured borrowing. The maximum secured loan was previously 115% from Accord Mortgages, a subsidiary of Yorkshire Building Society.

Unlike the Abbey's mortgage Alliance & Leicester's 100% plus LTV mortgage, called PlusMortgage, is not totally secured on the property. The amount over 100% LTV is in the form of an unsecured personal loan on which customers can make unlimited overpayments. Northern Rock's Together mortgage works the same way - up to 95% of the value of the property is a secured mortgage. The remainder is an unsecured loan of up to £30,000 which is charged at the same interest rate as the secured mortgage.

Sure about your mortgage choices? If you're not and you need someone to talk to, why not call us for independent, unbiased mortgage advice?

28 September 2007 © Moneyextra.com

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