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The return of the 100 per cent mortgage?

The ‘Big One-0’ – the 100 per cent mortgage is associated with those times where everything seemed flash.

With a mortgage product like this you didn’t need a deposit – heck, they might even lend that to you as well.
It is associated with easy money, with loans that could secure you a property and as long as you could cope with the maximum monthly repayment, you were fine. Or you thought you were…..

If you had a job, or sometimes just a freelance income, you could pretty much bimble into an estate agent’s office, find a place at the top end of your price range, sign up via various means and pick up the keys to your new home.
You’d have to have had a poor credit history to fail the tests.

Which is why it all went wrong.

In the recession of the late 80s/early 1990s, interest rates went to 15 per cent and over-extended homeowners handed in their keys to lenders by the thousand as the value of their property went down.

Never again, we all said. But by 2007, 100 per cent mortgages and easy loans, like those that were self-certified, were the mode du jour once again and we sat back to watch our house prices rise and thumbed the Travel Agents’ brochure for a plane ride to paradise.

Then came 2008 and we all know what happened then. Remember Northern Rock (which actually offered loans of up to 125 per cent)? Bradford & Bingley? Both demutualised lenders who were famous for their 100-per-cent mortgage deals. Finis.

Since then, with tightened lending criteria and historically low interest rates (which do somewhat curtail the creativity of lenders), the closest you can get to a 100 per cent loan is 95% per cent.  Family Building Society offer one of those specifically designed to help the first time buyer, and it is called a Family Mortgage. This is where family members put up 20%, the buyer 5% and the lender the balance. Essentially, this means leaning on Mum and Dad or Granny and Grandad for some much needed help.

But now, the poor old Bank of Mum & Dad, newly dubbed Bomad, has become a top ten lender in their own right with more than £6.5bn put into the housing market to help their young on to the housing ladder. It’s all gone the opposite way, with swathes of under 35s unable to reach the critical deposit while also paying blistering rents.

So, perhaps no surprise then that the Building Societies Association offered a report saying lenders should consider The Big One-0 again in order to take some of the growing pressure off Bomad and put a bit of life back into the strangled housing market.

The BSA is the industry body for the UK’s 43 Building Societies and lobbies government and regulators on their behalf and, by extension, their 23m British customers.

Well meaning as the BSA is, can there be a return to the rock ‘n’ roll days of the 100-per cent mortgage?
Let’s leave it to the Family Building Society’s own CEO, Mark Bogard, if he was in favour of 100 per cent mortgages.
He said: “Both personally, and as a Building Society, no.

“It is prudent to have at least some buffer, some equity both from the perspective of the lender and the borrower. Being in negative equity is a stress no individual wants. I’ve been there, having bought in 1988.
 
“The property market is uncertain; the interest rate environment is uncertain; the political environment is uncertain. We would counsel caution.”

The Family Building Society doesn’t do flash, we do our best.

By Steve McDowell

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Family Building Society
Ebbisham House
30 Church Street
Epsom
Surrey KT17 4NL
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