The 100% mortgage is back for the first time since the credit crunch.
Aldermore look set to become the first lender to offer a deposit-free mortgage since they were heavily criticised as exactly the type of irresponsible lending that helped generate 2008’s economic crisis.
So are we back to the bad old days?
No. Aldermore, which was set up in 2009, require a guarantor to use their own properties to guarantee up to 25% of the borrowers’ mortgage. That means that generous parents will be taking on the risk of financial hardship if repayments aren’t kept up with.
The 100% mortgage is restricted to properties worth £250,000 or less, to first-time buyers aged 25 or over and earning at least £10,000 a year. The guarantors will only remain liable for ten years of the mortgage term, which can stretch to a maximum of 35 years.
The move comes at a time when first-time buyers have found themselves between a rock and a hard place. The trend with most lenders has been to demand increasingly high deposits, the average stands around £65,000, while renting has never been more expensive, with London’s average over £1,000.
Other lenders are beginning to offer higher loan-to-value deals. Lloyds have an offer starting at 5% while Northern Rock, whose well-publicised demise was fuelled by a slew of low-deposit loans, have a 10% package aimed at first-time buyers.