Before the financial crash 10 years ago, 100 per cent mortgages were rife and the criteria was far less stringent than it is today.
Figures from Moneyfacts show that in August 2007, the number of 100 per cent mortgages stood at 238.
By the following year the number had plunged to 14, reaching its lowest figure in 2012 and 2013 when there were only five.
The numbers remained in single digits until 2017 when there were 11 such mortgages. So far this year there are around 18 products offering 100 per cent LTV.
Mr Shave says the mortgages are still a very niche product in the market. And the few that have sprung up are under a different guise to the likes of the Northern Rock mortgages, where people were allowed to borrow as much as 125 per cent of the mortgage value.
He adds: “I don’t think the market is going crazy because there are only a few products. It is not something that will be prolific, it’s just that lenders are doing them in a calculated way.”
Additional security
In agreement, David Hollingworth director at L&C Mortgages, says the market is a long way away from declaring that 100 per cent mortgages have re-entered the market.
“Lenders like Family BS, Barclays, Bath BS and Aldermore, and more recently the Post Office, are just some of the lenders using parental help to boost the LTV to 95 per cent or 100 per cent,” he says.
“However, this is not a return to the type of 100 per cent lending that was seen before the credit crunch. Here, the parent is offering additional security to the lender, whether in the form of cash or equity, so the lender still has added security.
“While you could never rule out a return to true 100 per cent lending, I still think we are some way off that point.”
Although the 100 per cent mortgages of today are seemingly different with tougher criteria and the added security element, they still come with risk. And of course, there is no guarantee that house prices will always go up.
Adviser influence
The increase in the number of lenders offering 100 per cent products is going to be driven by advisers as the majority of mortgages are sold by brokers.
Mr Mason says: “These products are great for brokers; however, the problem comes because the public don’t see them unless they are visiting a broker and the broker is recommending.
“It will only become more prevalent if the lenders advertise it more keenly, or a major player comes into the market, like a big four or big five. If that happens, you will see them start to take off. A lot of people literally do not realise it is an option.”
