100% mortgages were a type of mortgage product where the mortgage lender provided a mortgage to cover the full value of the property. You did not need to put down any deposit at all. If you were buying a property for 120,000 your new mortgage would be for the full 120,000
This type of mortgage disappeared from the UK mortgage market towards the end of 2008, as the 'credit-crunch' crunched. It happened very quickly, with first one mortgage lender and then the next withdrawing their 100% mortgage products from availability to new borrowers over a period of literally just weeks.
These mortgages were naturally very attractive and popular products for first time buyers. Without no deposit mortgages, many people who were able to get onto the property ladder between 2000-07 would have been left dreaming about home ownership. In fact one study has shown that more than 50% of people who obtained mortgages between 2003-06 would not have been able to obtain mortgages under current market conditions. This reduced flow of mortgage approvals has resulted in fewer first time buyers, and therefore a stagnated housing market with prices falling across many regions of the UK.
Looking back, with the benefit and wisdom of hindsight, it is easy to criticise this type of high loan to value mortgage and flag them up as risky products offered irresponsibly and short shortsightedly by UK mortgage lenders. But no deposit mortgages will almost certainly have contributed to the housing boom which occurred between 2000 to 2007 which very many people benefited from. As mentioned above, many homeowners would not have been homeowners over the last 10 years had it not been for this type of mortgage. The sudden rapid withdrawal of high loan to value mortgage products will have in itself acted as a significant factor in stagnating the housing market by reducing the number of first time buyers, I suspect.
So will no deposit mortgages make a return in the future? It is not likely that they will return in the short to medium term, and there has even been mutterings from MP's hinting that they should be banned. The UK mortgage market on a return to strength is likely to want to attract the all important first time buyer business again, and will innovate products in order to do so. This may perhaps be in the form of a no deposit mortgage where a parental property charge is taken as additional security, or a 90% mortgage with a 10% unsecured equity loan. It will be interesting to see what happens in the future when lenders regain an appetite to lend.
So in conclusion, no deposit mortgages seemed a safe bet for borrowers and lenders in a rising property market. But, they were always going to lead to problems if the property market turned. Are 100% mortgages intrinsically bad? No - I don't believe so. Are they risky? Of course. Greater equity has always meant lower risk for lender and borrower. However, if we just look at the big picture, I am sure the number of people that have benefited from no deposit mortgages over the last 10 years by far outweighs the number that have suffered.
But for now, and maybe forever - RIP 100% mortgages.
This type of mortgage disappeared from the UK mortgage market towards the end of 2008, as the 'credit-crunch' crunched. It happened very quickly, with first one mortgage lender and then the next withdrawing their 100% mortgage products from availability to new borrowers over a period of literally just weeks.
These mortgages were naturally very attractive and popular products for first time buyers. Without no deposit mortgages, many people who were able to get onto the property ladder between 2000-07 would have been left dreaming about home ownership. In fact one study has shown that more than 50% of people who obtained mortgages between 2003-06 would not have been able to obtain mortgages under current market conditions. This reduced flow of mortgage approvals has resulted in fewer first time buyers, and therefore a stagnated housing market with prices falling across many regions of the UK.
Looking back, with the benefit and wisdom of hindsight, it is easy to criticise this type of high loan to value mortgage and flag them up as risky products offered irresponsibly and short shortsightedly by UK mortgage lenders. But no deposit mortgages will almost certainly have contributed to the housing boom which occurred between 2000 to 2007 which very many people benefited from. As mentioned above, many homeowners would not have been homeowners over the last 10 years had it not been for this type of mortgage. The sudden rapid withdrawal of high loan to value mortgage products will have in itself acted as a significant factor in stagnating the housing market by reducing the number of first time buyers, I suspect.
So will no deposit mortgages make a return in the future? It is not likely that they will return in the short to medium term, and there has even been mutterings from MP's hinting that they should be banned. The UK mortgage market on a return to strength is likely to want to attract the all important first time buyer business again, and will innovate products in order to do so. This may perhaps be in the form of a no deposit mortgage where a parental property charge is taken as additional security, or a 90% mortgage with a 10% unsecured equity loan. It will be interesting to see what happens in the future when lenders regain an appetite to lend.
So in conclusion, no deposit mortgages seemed a safe bet for borrowers and lenders in a rising property market. But, they were always going to lead to problems if the property market turned. Are 100% mortgages intrinsically bad? No - I don't believe so. Are they risky? Of course. Greater equity has always meant lower risk for lender and borrower. However, if we just look at the big picture, I am sure the number of people that have benefited from no deposit mortgages over the last 10 years by far outweighs the number that have suffered.
But for now, and maybe forever - RIP 100% mortgages.
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For further information on 100% Mortgage products availability, why not pop over and visit the 100mortgagesuk.co.uk website.
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