End of the supersize mortgage

Last week saw no less than six lenders - including the newly-nationalised Northern Rock - pull out of the 'plus' mortgage market, meaning that borrowers that want to borrow up to 125% of a property's value have nowhere to turn.

Super-size me?

Super-size mortgages were always controversial. Typically cash-strapped first-time buyers took out the loans, which meant not only did they not need a deposit but they could also borrow funds to cover stamp duty, solicitor's fees and other moving costs. Borrowers taking out these deals were plunged into negative equity from day one but, while property prices were rising, this was a risk lenders were willing to take.

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Crunch on excess credit

But the credit crunch coupled with a stagnated housing market means lenders have become wary of lending above a property's value and one by one plus-size mortgages offered by the likes of Alliance & Leicester, Coventry Building Society, Godiva Mortgages and Northern Rock were withdrawn from the market last week. A&L blamed 'current market conditions' for the withdrawal of its PlusMortgage products while Coventry building society said there was less demand for its MOREgage range and that fewer applicants were being accepted than previously.

Denise Harvey, mortgage analyst at Moneyfacts, says Dunfermline building society and Scottish Widows are the only lenders which remain in the 100% plus market. Dunfermline only operates in Scotland and will lend more than a property's values to professionals and graduates only, while the Scottish Widows deal is only open to professionals. "Only time will tell if the market will continue to offer these mortgages but it will be no real surprise if these last two disappear as well," she says.

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29 February 2008 © Moneyextra.com

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