Loans of over 100% ‘may be a step too far’

Companies that offer buyers a loan of 100 per cent of the property value could be going “a step too far”, a mortgage analyst has claimed.

According to Julia Harris of moneyfacts.co.uk, many people are unable to get on the property ladder and consequently enter into 100 per cent or over loan-value (LTV) commitments.

However, this could be “one expense too far” for people having to make high monthly repayments and Ms Harris advises those looking to get into the housing market to consider a 100 per cent loan “very carefully” as they can be complex.

“While these mortgage deals may help you take your first step on to the property ladder, just how long will it take for property prices to rise to a level which matches your mortgage?” Ms Harris said.

“With only a handful of lenders in this niche market and the risks being much higher, the interest rates available are far from competitive.”

The LTV ratio of a mortgage represents the amount of money the buyer needs to borrow in order to purchase the property. For example, if a house cost £200,000 and a buyer selected an 80 per cent LTV, they would be borrowing £160,000 and paying the rest themselves.

© Adfero Ltd

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